Stocks rise on more signs of an economic recovery

NEW YORK - More signs that the economy is creeping toward recovery encouraged investors to move further into stocks - but cautiously.

Stocks rose moderately yesterday in light volume. There were no dramatic economic reports, but a smattering of positive data persuaded investors to take more chances on stocks. Financials were particularly in demand after a report quoting American International Group Inc.'s chief executive officer as saying the company would repay its bailout loans from the government.

News from the Philadelphia Federal Reserve of a pickup in Mid-Atlantic manufacturing also lifted the market, having offset a weaker-than-expected Labor Department report on first-time claims for unemployment.

The Dow Jones industrials rose 70.89, or 0.76 percent, to 9,350.05. The Standard & Poor's 500 index rose 10.91, or 1.09 percent, to 1,007.37, while the Nasdaq composite index gained 19.98, or 1.01 percent, to 1,989.22.

But there were still signs of caution. The low volume, typical for an August day, meant investors were not piling into the market. It also meant that price movements could be exaggerated.

In other trading, the Russell 2000 index of smaller companies rose 7.03, or 1.25 percent, to 568.68.

Crude oil fell 92 cents to finish at $72.91 a barrel on the New York Mercantile Exchange.

Investors were encouraged by the Philadelphia Fed's news that factory activity in the Mid-Atlantic region jumped back into positive territory in August, reaching its highest level since November 2007, before the recession began. The report echoed findings earlier this week in a similar survey for the New York region.

Meanwhile, the Conference Board's economic forecasting gauge, the index of leading economic indicators, increased for the fourth straight month during July, suggesting that the recession will end this summer, if it has not already.

The two reports helped counter news from the Labor Department that new claims for unemployment benefits rose unexpectedly to 576,000 last week. Economists had predicted a decline.

Financial stocks, and in turn the rest of the market, got a boost after Bloomberg News quoted AIG's new CEO, Robert Benmosche, as saying the company would repay its bailout loans. The insurer, which the government saved from collapse nearly a year ago, got a rescue package worth up to $182.5 billion.

Shares of AIG shot up 21.25 percent, climbing $5.66 to close at $32.30. Shares of Citigroup Inc., another recipient of a large bailout package, were up 35 cents, or 8.47 percent, at $4.48.

The market has been preoccupied with consumer spending during the last week. But investors took in stride news of Sears Holdings Corp.'s bigger-than-expected second-quarter loss. Although shares of Sears fell 11.88 percent, sinking $8.76 to close at $65.00, the pullback did not spread to the rest of the market.