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. The S&P’s financial index is up 2.1 percent this week; its utilities index is down 2.5 percent.
Even after this week’s gain, by one measure bank stocks are still less expensive than the broader market. The price-to-earnings ratio for financial companies is 14.4 for banks and insurers, compared with 16.2 for all companies in the S&P 500 index, according to FactSet.
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,” said Sheldon.
Bank of America rose 35 cents, or 2.6 percent, to $13.87. JPMorgan gained 95 cents, or 1.7 percent, $55.62 and Morgan Stanley rose 84 cents, or 3.4 percent, to $25.82.
Stocks also got a boost from deal news.
NV Energy surged $4.34, or 23 percent, to $23.62, leading a broad advance in utility companies, after a company owned by Warren Buffett’s Berkshire Hathaway agreed to pay a premium of 23 percent to buy the Nevada-based power provider.
Clearwire, a wireless network operator, surged $1.02 cents, or 29 percent, to $4.50 after satellite TV operator Dish Network raised its bid for the company to $6.9 billion.
In economic news, the number of Americans seeking unemployment aid rose last week, a sign layoffs have increased, the Labor Department said Thursday. Claims for unemployment aid rose 10,000 last week to 354,000. The government also lowered its estimate for U.S. economic growth in the first three months of the year to 2.4 percent from 2.5 percent.
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.
In commodities trading, oil rose 48 cents to $93.61 a barrel. Gold rose $20.20, or 1.5 percent, to $1,411.50 an ounce. The dollar fell against the euro and the Japanese yen.
In government bond trading, the yield on the 10-year note was unchanged at 2.12 percent.
