Stocks advanced on Thursday, reversing declines from the previous session after some positive data on the labor market and solid monthly sales from retailers encouraged buying.
But gains were muted as this year's rally, which has pushed major indexes to multi-year highs, has left some investors leery of a pullback.
We are trying to claw back a little bit of yesterday's loss - interestingly enough, it seems 13,000 on the Dow seems to be an inflection point, said Gordon Charlop, managing director at Rosenblatt Securities in New York.
We may be getting to a spot, based on current economic conditions, where we could be pretty close to fairly priced so the question will be, 'What will be the stimulus to continue to see the stock market gain?'
U.S. jobless claims fell 2,000 to 351,000 in the latest week, holding near four-year lows, the Labor Department reported. But the pace of growth in the U.S. manufacturing sector unexpectedly slowed in February, according to the Institute for Supply Management.
The Dow Jones industrial average <.DJI> gained 47.71 points, or 0.37 percent, to 12,998.78. The Standard & Poor's 500 Index <.SPX> added 7.99 points, or 0.59 percent, to 1,373.67. The Nasdaq Composite Index <.IXIC> climbed 23.54 points, or 0.79 percent, to 2,990.47.
Volume was a modest 3.22 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, and the CBOE Volatility index <.VIX> dropped 5.3 percent, indicating a level of complacency.
The S&P 500 has risen 9.3 percent so far this year, while the Dow has gained 6.4 percent and the Nasdaq has climbed 14.8 percent.
Retailers' shares moved higher after mild weather helped many U.S. chains post better-than-expected monthly sales in February. Gap Inc
The S&P retail index <.RLX> gained 0.5 percent and the Morgan Stanley retail index <.MVR> rose 1.2 percent.
Bank shares ranked among the best performers on hopes that the European Central Bank's second long-term liquidity injection
would ease the region's financial crisis. <.EU>
The S&P financial sector <.GSPF> gained 1.4 percent, led by a 2.7 percent rise in JPMorgan Chase & Co
Ford Motor Co
(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)