NEW YORK — Wall Street rose Thursday as investors bought back into stocks after two days of losses, encouraged by a drop in unemployment claims and a better- than-expected sales performance by discount retailers.
Although last week the Labor Department said the four-week average of initial unemployment claims rose to a two-and-a-half-year high, investors were pleased to hear that claims last week fell by more than expected, following a surge the previous week.
And while many retailers — from the Gap to Saks — said Thursday that March sales slid as consumers grew more frugal, Wall Street was encouraged that other companies are weathering the economic weakness.
Discount retailers Wal-Mart and Costco, stores that sell staples such as food and gasoline, reported sharp increases in March sales and indicated they expect sales to keep rising.
But overall, retailers had their worst March in 13 years.
“Consumers are buying what they need,” said Jennifer Black, president of Jennifer Black & Associates, an equity research company in Lake Oswego, Ore. For everything else, shoppers are being pickier and focusing on discounters, she said.
According to a preliminary tally by UBS-International Council of Shopping Centers, sales slid 0.5 percent versus its original estimate of 1 percent growth. The results, based on same-store sales or sales at stores opened at least a year, were the weakest since March 1995, when the industry registered a decline of 0.8 percent.
“The jobless claims snapped back down following the sharp rise last week. Combined with the news from Wal-Mart, it suggests that the consumer may be able to muddle through. That’s providing some support for an otherwise strained market,” said Alan Gayle, senior investment strategist for RidgeWorth Capital Management.
Questions about the health of the global financial system ahead of next week’s bank earnings, however, continue to provide a troubling backdrop for the market.
Lehman Brothers Holdings disclosed in a regulatory filing Wednesday that it liquidated three funds because of the tight credit markets and brought the assets of those funds, valued at $1 billion, onto its books Feb. 29.
The Dow Jones industrial average rose 54.72, or 0.44 percent, to 12,581.98.
Broader stock indicators also advanced. The Standard & Poor’s 500 index rose 6.06, or 0.45 percent, to 1,360.55, and the Nasdaq composite index rose 29.58, or 1.27 percent, to 2,351.70.
“This market is basically trying to look forward,” said Peter Cardillo, chief market economist at New York-based brokerage house Avalon Partners. “There’s a lot of negative factors.”
Treasury Secretary Henry Paulson said in a speech Thursday that the economy has turned sharply lower, echoing comments by Federal Reserve Chairman Ben Bernanke, who has acknowledged the United States is probably in recession.
But, Cardillo noted, “the market knows all of these things.”
