* Oil drops anew, aiding hopes of spending revival
* Financials rebound after two days of losses
* Inflation, labor market weakness fuel caution
* Wal-Mart cautious outlook overshadows Q2 profit beat
* Dow and Nasdaq up 0.9 pct, S&P 500 up 0.6 pct
(Updates to midday)
By Ellis Mnyandu
NEW YORK, Aug 14 (Reuters) - U.S. stocks rose in thin
trading on Thursday after oil prices fell anew, buoying hopes
that consumer spending will recover, while financial shares
rebounded from a sharp two-day sell-off.
The revival on Wall Street followed an initial drop
sparked by government data that showed consumer prices rose at
twice the rate expected in July, while in the latest week,
there was further deterioration in the labor market.
Although inflation remains a concern, investors were
optimistic that recent drops in the prices of key commodities,
particularly oil, will ease inflation strains in the long run.
Oil <CLc1> fell nearly 1 percent to trade at $114.51 a barrel
in New York at midday on Thursday.
Financial shares rebounded from an 8 percent slide over
the last two sessions, in part on the view that the latest
government data showed inflation pressures may have peaked,
especially in light of the recent sell-off in commodity and
energy markets. That could let the Federal Reserve hold off on
rate increases to fight price pressures.
Shares of Bank of America Corp <BAC.N> , the No. 2 U.S.
bank, gave the biggest boost to the S&P 500, and led the Dow's
financial constituents, with a gain of 4.1 percent to $30.05.
JPMorgan Chase <JPM.N> was also a standout, up nearly 3
percent, two days after the No. 3 U.S. bank roiled investors
with news that it had taken $1.5 billion of further
write-downs in the current quarter as it grapples with fallout
from the housing slump.
"The fact that financials are on the mend is part of
what's giving the market buoyancy today," said Peter Kenny,
managing director at Knight Equity Markets in Jersey City, New
Jersey.
"The only hope that this market has is that with the
commodity prices having come down fairly substantially over
the last month or so, that trend will continue. If it
continues, it will go a long way in helping the Fed not have
to raise rates."
The Dow Jones industrial average <> rose 108.29
points, or 0.94 percent, to 11,641.25. The Standard & Poor's
500 Index <.SPX> climbed 7.95 points, or 0.62 percent, to
1,293.78. The Nasdaq Composite Index <> shot up 22.84
points, or 0.94 percent, to 2,451.46.
JPMorgan shares climbed 2.9 percent to $37.97.
Shares of mortgage finance providers Fannie Mae <FNM.N>
and Freddie Mac <FRE.N> also headed higher.
Fannie Mae jumped 6.5 percent to $8.14 on the New York
Stock Exchange, as Freddie climbed 7 percent to $5.94.
The S&P financial index <.GSPF> was up 2.2 percent,
recovering a day after it recorded its worst two-day slide in
six years.
On Nasdaq, shares of BlackBerry maker Research In Motion
<RIM.TO><RIMM.O> led advances, rising 2.5 percent to $130.10.
Shares of biotechnology company Amgen <AMGN.O> jumped
almost 2 percent to $64.73 after its stock was recommended by
Goldman Sachs, which added it to its "conviction buy" list.
Shares of Wal-Mart Stores <WMT.N> rose 0.3 percent to
$58.06 after the world's largest retailer offered a cautious
outlook for the current quarter despite its second-quarter
profit topping estimates.
Before the opening bell, Wall Street got some sobering
news about the U.S. economy. The Labor Department's Consumer
Price Index rose at twice the rate expected in July for the
fastest year-over-year inflation rate in 17-1/2 years. The
jump was blamed on costlier energy and food costs. In the
latest week, the number of people filing new claims for
jobless benefits fell, but the level of claims was well above
economists' expectations, suggesting labor market strain.
(Editing by Jan Paschal)
