Dow Futures

NEW YORK (TheStreet) -- Stocks were extending gains Thursday as sentiment got a boost from signs of improvement in the U.S. economy.

The Dow Jones Industrial Average was up 65 points, or 0.5%, at 12,174. Leading the index higher was Bank of America(BAC), JPMorgan Chase (JPM)and General Electric(GE). Seven of 30 components were trading lower, with United Tech Corp(UTX), Coca-Cola (KO)and McDonald's(MCD) leading losses.

The S&P 500 was up 10 points, or 0.8%, at 1254 and the Nasdaq was up 24 points, or 0.9%, at 2602.

Key economic data out of the U.S. put the market on good footing even though the European debt crisis still threatened to throw off momentum. Overall, "the U.S. is the least dirty shirt in the laundry," said Stanley J.G. Crouch, chief investment officer at Aegis Capital.

The latest reading on initial jobless claims hit a 44-month low, dropping by 4,000 to a better-than-expected 364,000. Economists had forecast a rise to 375,000. The prior week's figure was upwardly revised from 366,000 to 388,250.

Investors tend to welcome a downward trend in claims data even though the weekly numbers are often volatile and don't always mean more hiring. Dan Greenhaus, market strategist with BTIG, estimates that current initial claims numbers suggest the economy will create close to 200,000 new jobs in December. "Given how far into the recovery we are, this is the least that should be expected and quite frankly, it's the least that's being realized," he writes in a research note. "But job growth later is better than job growth never and based on the initial claims data, job growth is set to continue."

In a separate report, U.S. consumer sentiment also showed improvement. An index on consumer sentiment from the University of Michigan came in at 69.9 in December, after a revised 64.1 in the prior month. Economists had expected the reading to edge up to 68, following an original reading of 67.7 in November.

The Conference Board's index of leading indicators, another gauge of the state of the economy, rose 0.5% in November, beating the 0.3% forecast and adding to the 0.9% increase in the prior month.

The one downbeat piece of economic data Thursday was the government's third and final estimate of economic growth for the third quarter. Growth in gross domestic product growth came in at an annual rate of 1.8%, slightly missing economists' expectations for 2% growth. While raising concerns about the economy going forward, however, the GDP report tends to have a muted impact on trading.

Some market participants say that while the market is trying to move higher -- in so-called Santa Claus rally often seen around year end -- gains have not been as robust as expected. "We're getting a rally but it's tenuous," said Crouch of Aegis Capital.

"Moves can be exasperated by the lack of players," he added.

Investors are still on the lookout for surprise headlines out of Europe, including further indications on what role the central bank will play in the debt crisis. The European Central Bank's decision to increase lending to euro-region banks, in particular, has been an area of focus recently. Some market participants say Wednesday's plan for a bigger-than-expected liquidity boost from the ECB was a step in the right direction while others are still doubtful it is a signal the region can stem the debt crisis. The bigger than expected loan was a surprise, in particular, because the ECB had downplayed how much it could help alleviate the crisis in preceding days.

Earlier Thursday, Italy approved an austerity budget with a vote of confidence from its senate. The move was widely expected as the country has been forced to tighten fiscal spending to keep a cap on its debt to GDP ratio.

Germany's DAX closed up 1.1% and London's FTSE rose 1.3%. Japan's Nikkei Average settled 0.8% lower, and Hong Kong's Hang Seng Index closed down 0.2%.

Crouch of Aegis Capital noted that not enough attention has been given to Greece, whose restructuring talks have broken down recently. The market seems to be looking past the bad news there, he said. "People have dismissed Greece and have already written it off."

On Wednesday, the Dow gained 4 points, while the S&P 500 crept up 2 points. Poor quarterly results from Oracle kept the Nasdaq in the red.

In corporate news, Yahoo!'s(YHOO) board is considering a sale of the bulk of the company's holdings in Alibaba Group of China and Yahoo!'s Japanese affiliate back to their majority owners in a transaction that values the stakes at about $17 billion, The New York Times reported, citing people briefed on the matter. The board is expected to meet Thursday to discuss the broad outlines of the offer, the Times said. The stock was rising 1.3% to $16.19.

Micron Technology(MU) posted a first-quarter loss of $187 million, or 19 cents a share, on revenue of $2.09 billion amid continued declines in pricing for dynamic random-access memory products. Analysts were expecting a loss of 8 cents a share on revenue of $2.13 billion. Shares were up 17% to $6.49.

Bed Bath & Beyond(BBBY), the specialty retailer, beat Wall Street's earnings third-quarter expectations, but came in slightly below expectations on the top line. The company posted third-quarter profit of $228.5 million, or 95 cents a share, on sales of $2.34 billion. Analysts were expecting earnings of 88 cents a share on revenue of $2.35 billion. Shares were sliding 6.4% to $57.49.

Toyota(TM) is targeting record global sales of 8.48 million vehicles in 2012 and 8.95 million vehicles in 2013, as the automaker bounces back from the March earthquake and tsunami in Japan that crimped production. Toyota, Japan's No. 1 automaker, fell behind General Motors(GM) and Volkswagen as the top global car seller in the first half of the year. Toyota said Thursday global vehicle sales for this year totaled 7.9 million vehicles, down 6% from the previous year. Shares were edging up 0.4% to $64.48.

Bank of America(BAC) will pay $335 million to settle U.S. Department of Justice charges that alleged discriminatory lending practices by its Countrywide Financial unit. The settlement, announced Wednesday, will be the largest residential fair lending settlement in history and will compensate thousands of African-American and Hispanic borrowers who were victims of the alleged discriminatory practice. Shares were up 3.5% to $5.41.

The dollar index was down 0.1%. The benchmark 10-year Treasury was up 3/32, diluting the yield to 1.96%.

February oil futures were up 96 cents to $99.63 a barrel. February gold futures were down $4 to $1610.60 an ounce.

-- Written by Chao Deng in New York.

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