Stocks Rally, with Dow Back Above 10,000

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On Thursday, the Labor Department said initial claims for jobless benefits fell to 512,000 last week, the lowest level since January. Economists had expected 523,000 new claims.

The report offered investors fresh hope that the government's monthly report on employment Friday may come in better than expected. Economists expect the unemployment rate to have risen to 9.9% in October.

Rising unemployment is one of the economy's biggest obstacles to sustained growth. Consumer spending, which is a major component of economic activity, will be sluggish so long as job losses remain high.

U.S. nonfarm productivity growth rose at a torrid 9.5% clip in the third quarter, the fastest pace in six years and much higher than economists had expected. It follows a revised 6.9% rate of growth in the second quarter (from 6.6%).

"Obviously cost cutting and layoffs through the recession have kept productivity rising at very robust rates," said Action Economics analysts in a website posting Thursday.

Mixed data have made it difficult for investors to get a sense of where the economy is headed, leading to increasingly choppy stock trading. The Federal Reserve on Wednesday described an improving economy, but also said it would keep interest rates low for "an extended period" to help stimulate growth.

Low interest rates have one of the drivers in the stock market's more than 50% gain since March, encouraging investors to search for assets with higher yields than cash. But investors worry that the Fed's pledge to keep rates low for some time signals that the central bank believes the economic recovery is fragile.

"The Fed did lay out some guideposts yesterday, and indicated they would leave rates low as long as there were 'low rates of resource utilization, subdued inflation trends, and stable inflation expectations'," said Action Economics. "We're not as sanguine as the Fed is regarding inflation expectations given the run up in gold and other commodity prices, and widening TIPS spreads."

The U.S. Department of Justice filed criminal charges against 14 people Thursday for their alleged involvement in insider trading in the hedge-fund industry. The charges involve current and former employees at Galleon Group, law firm Ropes & Gray and Incremental Capital, and primarily involve insider trading activities involving several merger and acquisitions. The complaint alleges former Galleon and Shottenfeld employee Zvi Goffer, and at least six other defendants knowingly conspired to defraud, make untrue statements and omit facts, as well as engage in fraudulent and deceitful acts.

Andrews is managing editor of the Investing Channel for BusinessWeek.com .

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