Financials Lead Wall Street Higher

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Stocks drifted higher, led by financial shares, after encouraging jobless claims and consumer sentiment data offset a dreary third-quarter economic growth report.

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Today's Markets

The Dow Jones Industrial Average climbed 61.9 points, or 0.51%, to 12,170, the S&P 500 gained 10.3 points, or 0.83%, to 1,254 and the Nasdaq Composite rose 21.5 points, or 0.83%, to 2,599.

Financials performed the best on the day by a wide margin. JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC), the two biggest lenders in America, jumped the most out of the blue chips. Citigroup (NYSE:C) leaped 4.9%, and investment banking giants Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:GS) were strongly to the upside as well.

The technology sector rebounded somewhat after getting slammed on Wednesday, while consumer staples, such as Target (NYSE:TGT) lagged behind the broader markets.

Encouraging U.S. Economic Data

Weekly jobless claims fell 4,000 to 364,000 last week, better than the 375,000 economists expected. Claims are now at the lowest level since mid-April 2008. The labor market has been slow to recover from the recession, but has shown signs of improvement.

"It appears the recovery in the labor market is gaining further traction," Troy Davig, an economist at Barclays Capital, wrote in a note to clients. Davig notes the claims reports tend to be volatile, but the recent downward movement appears to be part of a trend and not just weekly volatility.

In fact, the unemployment rate fell beneath the 9% mark in November, and first-time claims for jobless benefits are at the lowest level since 2008.

The final December reading of the University of Michigan/Reuters consumer sentiment index topped analysts' expectations as well. The gauge hit 69.9 in late December from a prior estimate of 67.7, and economists' forecasts of 68. The consumer sector is a key portion of the economy, and therefore consumers often play an outsized role in broader growth figures.

The economy expanded at an annualized pace of 1.8% in the third quarter, according to a report from the Commerce Department, slightly shy of a previous estimate of 2%, and missing economists' expectations. Economists say the downward revision was largely due to a significant change to consumer service spending.

The report is a lagging indicator, however, and economists are already looking to see how headwinds from Europe's debt crisis began affecting the economy toward the end of the year.

"Despite the downward revision ... recent U.S. data indicate that fourth quarter growth has accelerated," Nariman Behravesh, chief economist at IHS Global Insight wrote in a reserch note. "However, the stronger growth momentum is unlikely to be sustained through the first half of next year."

In the foreign exchange market, the euro ticked 0.03% higher to $1.305, while the greenback fell 0.02% against a basket of six trading partners.

Commodities markets got a modest boost from the weaker U.S. dollar. The benchmark New York crude oil contract rose 87 cents, or 0.87%, to $99.53 a barrel. Wholesale RBOB gasoline climbed 0.76% to $2.6398 a gallon.

Gold dipped $3.00, or 0.19%, to $1,611 a troy ounce.

Foreign Markets 

European blue chips jumped 1.3%, the English FTSE 100 rallied 1.3% to 5,457 and the German DAX gained 1.1% to 5,852.

In Asia, the Japanese Nikkei 225 fell 0.77% to 8,395 and the Chinese Hang Seng dropped 0.21% to 5,867.

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