NEW YORK -- A drop in unemployment claims combined with a rise in home sales to pull the stock market higher in light trading ahead of Thanksgiving.
Modest gains Wednesday left the Dow Jones industrial average and the Standard & Poor's 500 index at 13-month highs.
The economic news, as well as a drop in the dollar, stoked investors' appetite for higher-returning but riskier investments like stocks. For months, investors have been weighing their desire for bigger returns with fears that the stock market will falter if the economy looks like it won't maintain a recovery.
Investors drew confidence from a handful of promising economic reports. The government said new unemployment insurance claims fell by 35,000 last week to 466,000 - the fewest since September last year, and better than the 500,000 that economists had expected.
The drop in claims suggests the job market is healing, but concern remains that the improvement will be temporary. The jobless rate hit 10.2 percent in October and many analysts believe it will keep rising before starting to improve next summer.
Home sales improve
In other economic reports, sales of new homes rose 6.2percent to an annual rate of 430,000. That's greater than what economists whom Thomson Reuters surveyed had expected.
The government also said spending rose a brisk 0.7 percent last month, after having fallen in September. It was the best showing since August, when the government's now-defunct Cash for Clunkers programs enticed people to buy cars.
Increased spending by consumers is seen as necessary for the economy to sustain a rebound. The report was a welcome sign as the holiday shopping season goes into full swing.
Not all the day's news was promising, however. Orders for expensive manufactured goods dropped 0.6 percent last month, the first decrease since August. Economists had expected orders would grow.
Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, N.J., said that investors are still worried about the sustainability of a recovery, but they're afraid of missing more of the market's eight-month rally.
"People may not believe in this market but they're reluctantly being pulled into it with each of these reports," he said.
The Dow Jones industrial average rose 30.69, or 0.3percent, to 10,464.40, its second gain in three days and its best finish since October 2008.
The broader Standard & Poor's 500 index rose 4.98, or 0.5 percent, to 1,110.63, and the Nasdaq composite index rose 6.87, or 0.3 percent, to 2,176.05.
U.S. markets are closed for Thanksgiving and close early Friday.
The drop in the dollar fanned the price of oil. Crude rose $1.94 to settle at $77.96 per barrel.
Overseas, Japan's Nikkei stock average rose by 0.4 percent, Britain's FTSE 100 rose by 0.8 percent, Germany's DAX index rose by 0.6 percent, and France's CAC-40 rose by 0.7 percent.
