NEW YORK — The stock market rose Thursday after a pair of lackluster economic reports raised expectations that the Federal Reserve will continue to boost the economy with its stimulus program.
Unemployment claims rose and an initial estimate of first-quarter economic growth was revised slightly lower. That suggests the U.S. economy may still need some time to recover from its funk and that the Fed will keep up its $85 billion in monthly bond purchases.
“The big worry that’s been hitting the market lately, that the Fed might step back prematurely, might be fading a little today on the idea that the economy does need a bit more support,” Jeff Kleintop, chief market strategist at LPL Financial, said.
The rise in the Standard & Poor’s 500 index was led by banking and insurance stocks, which gained 1.1 percent. Among individual bank stocks, Bank of America rose to its highest in more than two years. JPMorgan also climbed.
Banks and other stocks that stand to benefit the most from an improving economy have surged this week, a change from earlier in the year when investors favored dividend-rich stocks like utilities. Now investors are selling dividend-rich stocks and buying so-called growth stocks.
Banks are also attractive to investors because they have the capacity to increase their dividends from the current low levels, having bolstered their cash reserves after the financial crisis, Michael Sheldon, chief market strategist at RDM Financial, said.
“Banks appear to be on the mend,” Sheldon said.
Bank of America rose 35 cents, or 2.6 percent, to $13.87. JPMorgan gained 95 cents, or 1.7 percent, to $55.62, and Morgan Stanley rose 84 cents, or 3.4 percent, to $25.82.
The S&P 500 rose in early trading, climbing as much as 13.55 points, or 0.8 percent, by late afternoon. The index then gave up some of its gain in the last hour of trading to end up just 6.05 points, or 0.4 percent, at 1,654.41.
The Dow Jones industrial average closed up 21.73 points, or 0.1 percent, at 15,324.53 points. The Nasdaq composite index rose 23.78 points, or 0.7 percent, to 3,491.30.
Trading has been choppy on Wall Street this week as investors wrestle with the question of whether the Fed will ease its economic stimulus. Minutes released last week from the Fed’s last policy meeting showed that some central bank officials favored slowing the purchases as early as next month, if the economy improves enough.
The Dow Jones industrial average rose 106 points Tuesday, then fell by the same amount Wednesday.
