Signs of strength in the labor market and manufacturing sector, as well as higher quarterly profit from FedEx, pushed U.S. stocks slightly higher on Thursday, but the mood was fragile as investors kept their eyes on Europe's festering debt crisis.
The data signaled a continuation of the now familiar tug of war between optimism about the U.S. economy and fears that Europe's debt crisis could spark a global recession.
Reflecting that struggle, indexes were off their highs of the morning and the Nasdaq bobbed around the breakeven mark, suggesting investors were hesitating before buying into the better-than-expected U.S. data.
The world economic outlook is quite gloomy and will require action by all countries to head off an escalating crisis that carries risks of a global depression, Christine Lagarde, the head of the International Monetary Fund, said on Thursday.
Tim Ghriskey, chief investment officer of Solaris Asset Management in Bedford Hills, New York said the question for investors is whether the U.S. economy can continue to grow in the event of a serious recession in Europe.
Can the U.S. go it totally alone? No. But the rest of the world, with the exception of Europe, we are pretty positive about. We don't think it's going to fall apart, he said.
The news from FedEx was welcome after a number of high-profile companies warned about revenues and profits in recent days. On Thursday Honeywell
The Dow Jones industrial average <.DJI> rose 45.60 points, or 0.39 percent, at 11,869.08. The Standard & Poor's 500 <.SPX> added 4.07 points, or 0.34 percent, at 1,215.89. The Nasdaq Composite <.IXIC> fell 2.45 points, or 0.10 percent, at 2,536.86.
New applications for unemployment insurance fell to a 3-1/2 year low, suggesting a job market recovery was gaining speed, while a gauge of New York state manufacturing activity rose to its highest level since May.
It all speaks to further stabilization and a very positive trend in the U.S. economy, said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.
Wall Street fell for a third day on Wednesday to its lowest level in two weeks with the market highly sensitive to developments in Europe.
Spain saw bond yields fall in a well-received auction, raising roughly twice what the government had targeted. Equity markets have lately tracked European bond prices, using them as a gauge of risk appetite.
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(Reporting by Edward Krudy; editing by Kenneth Barry)