Stocks advance as investors sift through data

A pullback in oil prices and deal-making at major companies including General Electric Co. and CBS Corp. also helped stocks stay afloat.

"The encouraging news is that the markets have become more functional, and large companies are able to make strategic purchases and sales, which previously was a very difficult thing to do," said Alan Gayle, senior investment strategist for RidgeWorth Capital Management. Still, he added, "the market is still trying to digest the severity of the slowdown."

Fears of a credit market meltdown have eased significantly. Federal Reserve Chairman Ben Bernanke said in a speech in Chicago he is "encouraged" by recent efforts by banks to raise cash -a trend that is helping to relieve the credit crisis.

But, Gayle said, "what we're left with now are cyclical credit strains. And those are likely to linger for a while."

The Labor Department said the number of laid off-workers applying for jobless benefits rose last week by 6,000 to 371,000 -near the average analyst forecast, and suggesting that the labor market remains weak but in check.

The Philadelphia Federal Reserve said regional manufacturing activity is contracting in May at a slower pace than in April, and at a milder clip than analysts expected. But the Fed said nationwide industrial output sank for the second straight month in April by 0.7 percent, due to big cutbacks in the automotive and other manufacturing industries. The drop was more than double analysts' average prediction.

In late afternoon trading, the Dow Jones industrial average rose 42.66, or 0.33 percent, to 12,941.04.

Broader stock indicators also advanced. The Standard & Poor's 500 index rose 7.90, or 0.56 percent, to 1,416.56, and the Nasdaq composite index rose 23.66, or 0.95 percent, to 2,520.36.

The technology-laden Nasdaq got a boost from Intel Corp., which rose 76 cents, or 3.2 percent, to $24.60 after a Lehman Brothers analyst lifted his price target on the chip maker, citing strong product demand.