The market was uneasy after the Mortgage Bankers Association said homeowners beginning the foreclosure process in the second quarter reached a record 0.65 percent. It was the third consecutive quarter that the figure reached an all-time high. Though investors want growth to be slow enough to merit a rate cut when the Federal Reserve meets Sept. 18, they don't want to see the economy weaken to the point of recession.

But investors gleaned some reason for optimism from comments from Dallas Federal Reserve President Richard Fisher, who said inflationary pressures are "increasingly well behaved," and that the central bank is "listening carefully" to business conditions. St. Louis Fed President William Poole made similar comments earlier in the day.

"They didn't explicitly say they were going to cut rates, but some of the talk from the day gave reason to believe they may be leaning that way," said Todd Salamone, director of trading at Schaeffer's Investment Research. "The market is driven by words from the Fed that reinforces the idea they'll step up if necessary, and it is also very much data driven."

Reports on the job market, service sector, and August retail sales did not disappoint investors. Last week, for the first time in seven weeks, claims for unemployment benefits dropped, the Labor Department said. It also reported that worker productivity jumped to an annual growth rate of 2.6 percent in the April to June quarter, much better than expected.

The snapshots boded well for Friday's August employment report, the economic reading that investors are considering the most important this week.

DOW ENDS DAY UP

According to preliminary calculations, the Dow Jones industrial average rose 57.88, or 0.44 percent, to 13,363.35, after earlier wobbling in and out of positive territory.

Broader stock indicators also lifted. The Standard & Poor's 500 index rose 6.26, or 0.43 percent, to 1,478.55, and the Nasdaq composite index rose 8.37, or 0.32 percent, to 2,614.32.

Bonds fell as stocks recovered ground. The yield on the benchmark 10-year Treasury note, which moves inversely to its price, rose to 4.51 percent from 4.47 percent late Wednesday. The dollar was lower against most other major currencies, while gold prices jumped.

The credit markets, whose problems caused the volatility on Wall Street over the past month, remain tight. The New York Fed, which carries out the central bank's market operation, injected a total of $31.25 billion through three repurchase agreements Thursday — the largest amount the Fed has injected in weeks — to help keep the markets liquid.

The Fed also reported that about 3 percent of asset-backed commercial paper, a type of bond companies sell for quick cash, was unable to be rolled over in the week ended Wednesday.

Further, Wall Street doesn't want to see signs of accelerating inflation — such as surging crude oil prices, which briefly spiked above $77 a barrel Thursday on supply worries after the U.S. embassy in Nigeria said American and other Western interests in the country are at risk of a terrorist attack and after news that Syrian armed forces had opened fire on Israeli fighters. Inflationary risks have kept the Fed from lowering interest rates in recent months.

A barrel of light, sweet crude rose 57 cents to $76.30 on the New York Mercantile Exchange.

KEY JOBS REPORT COMING TOMORROW

John O'Donoghue, co-head of equities at Cowen & Co., said most of Thursday's news was fairly benign. He explained that most people were waiting to see the jobs report on Friday, which could provide the markets a better idea about what the Fed's next move will be.

"They're waiting for the jobs number," he said. "I think people are kind of sitting on their hands."

With investors on alert for any sign that recent financial market turmoil has hurt consumer spending, better-than-expected August sales from major retailers Wal-Mart Stores Inc. and Target Corp. perhaps came as a welcome surprise.

Wal-Mart said same-store sales, which measure business at stores open at least one year, rose 3.1 percent, while Target said same-store sales in August rose 6.1 percent.

The two biggest retailers beat Wall Street estimates. Wal-Mart rose 31 cents to $42.76, and Target rose $1.51, or 2.4 percent, to $63.39.

Tony department store chain Saks Inc., teen apparel retailer Pacific Sunwear of California Inc. and children's clothier The Children's Place Retail Stores Inc. also topped analyst projections. Saks rose 49 cents, or 3.2 percent, to $15.81, Pacific Sun advanced 74 cents, or 5.2 percent, to $14.99, while Children's Place fell 29 cents to $27.68.

Meanwhile, the Institute for Supply Management's reading on the non-manufacturing sector showed that activity expanded in August at the same rate as in July.

Not only were investors worried about the rising foreclosure rate, but late Wednesday, mortgage lender Countrywide Financial Corp. said it will cut another 900 jobs nationwide after eliminating about 500 positions last month. The nation's largest mortgage lender by volume employs about 60,000 people.

Countrywide fell 33 cents, or 2.1 percent, to $18.48.

Lehman Brothers Holdings Inc. fell 52 cents to $53.83 after the nation's fourth-largest investment bank announced it is laying off 850 people from its home lending business in the U.S. and Britain. The company previously announced the closure of its BNC Mortgage LLC subsidiary.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to about 1.28 billion shares, up from 1.25 billion on Wednesday.

The Russell 2000 index of smaller companies fell 0.35, or 0.04 percent, to 792.92.

Overseas, Japan's Nikkei stock average rose 0.61 percent. Britain's FTSE 100 rose 0.68 percent, Germany's DAX index rose 0.44 percent, and France's CAC-40 advanced 0.45 percent.

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