Wall Street is mixed after jobless claims report

Investors were also monitoring a speech by Federal Reserve Chairman Ben Bernanke in Chicago. Bernanke said in prepared remarks he is "encouraged" by recent efforts by banks to raise cash -a trend that is helping to relieve the credit crisis.

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.

However, the Fed dealt the market a blow when it said industrial output sank for the second straight month in April. The decline of 0.7 percent, driven by big cutbacks in the automotive and other manufacturing industries, was more than double the drop analysts predicted.

The Dow Jones industrial average fell 8.55, or 0.07 percent, to 12,889.83.

The Standard & Poor's 500 index rose 0.80, or 0.06 percent, to 1,409.46, and the Nasdaq composite index rose 5.36, or 0.21 percent, to 2,502.06.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.89 percent from 3.92 percent late Wednesday.

The dollar was lower against most other major currencies, and gold prices rose.

In recent weeks, investors have been growing more optimistic recently that the economy may not be as weak as many feared, and that inflation, despite the soaring price of oil, is not out of control. But a major concern for the market is whether higher food and energy costs are hampering Americans' ability to spend.

In morning trading on the New York Mercantile Exchange, crude prices surpassed $125 a barrel, climbing back toward record levels.