* Initial jobless claims fall more than expected
* Report of Deutsche Bank capital raise worries investors
* McDonald's Corp European sales disappoint
* Indexes up: Dow 0.3 pct; S&P 0.5 pct; Nasdaq 0.3 pct
* For up-to-the-minute market news see []
(Updates to close)
By Edward Krudy
NEW YORK, Sept 9 (Reuters) - U.S. stocks rose on Thursday
as stronger-than-expected jobs and trade data helped lift
optimism about the economic recovery, although sentiment was
fragile as investors fretted over European banks.
Financials, hit hard in the August downturn, were among top
gainers as new U.S. claims for unemployment benefits fell to a
two-month low, while the trade deficit narrowed sharply in
July. JP Morgan Chase & Co <JPM.N> rose 2.5 percent to $40.10.
"The recovery is not falling apart and continued growth is
the most likely outcome," said Zach Pandl, economist at Nomura
Securities International in New York. "This is generally a bond
negative and positive for stock prices."
However, defensive sectors such as healthcare, utilities
and telecommunications services also gained in a sign investors
remain cautious. The S&P healthcare index <.GSPA> rose 1.2
percent, with Pfizer Inc <PFE.N> up 1.3 percent to $16.77.
Volume was light and trading volatile as some traders were
off for the Jewish new year holiday in an already slow week
shortened by Monday's Labor Day holiday.
The Dow Jones industrial average <> gained 28.23
points, or 0.27 percent, to 10,415.24. The Standard & Poor's
500 Index <.SPX> rose 5.31 points, or 0.48 percent, to
1,104.18. The Nasdaq Composite Index <> added 7.33 points,
or 0.33 percent, to 2,236.20.
Earlier, the S&P 500 touched a one-month high above 1,110
after data showed new claims for unemployment insurance fell to
their lowest level in two months last week, while the U.S.
trade deficit narrowed sharply in July.
But some expressed skepticism over the data as a Labor
Department official said some states had been unable to submit
claims in time because of the Labor Day holiday, resulting in
the department's making estimates for them. For details, see
[]
Deutsche Bank shares came under pressure on a Bloomberg
report citing people with knowledge of the discussions saying
the German bank had approached investment banks about managing
a stock sale to raise as much as 9 billion euros ($11.4
billion).
Deutsche Bank declined to comment, and it remained unclear
whether it may need the capital to cover exposure to potential
risky sovereign debt or was trying to increase its stake in
Deutsche Postbank <DPBGn.DE>.
"The Street seems to be confused about whether it's due to
sovereign exposure or their take out of Postbank," said David
Lutz, managing director of trading, Stifel Nicolaus Capital
Markets in Baltimore.
Also adding to investors' nervousness, Juergen Stark, a
member of European Central Bank Executive Board, told a meeting
of German lawmakers late Wednesday that German banks are
undercapitalized. []
But helping shares in the U.S. financial sector, veteran
banking analyst Richard Bove said at least 17 U.S. banks with
more than $10 billion in assets could emerge as possible
takeover targets. They included Zions Bancorp <ZION.O>, up 2.6
percent to $20.31, and Capital One Financial <COF.N> up 0.8
percent to $39.40. For a list of Bove's picks, see
[].
The S&P 500 has risen for six of the last seven sessions.
Technical analysts continue to point to a bullish inverse "head
and shoulder" formation in the index with a "neck line" at
1,130 that could signal a potential break out to around 1,250.
"The frustrating sideways action in the S&P 500 and many
developed markets belies a burgeoning build-up of bullish
demand, which holds the potential to power prices significantly
higher over the final stanza of 2010 and well into 2011," wrote
Auerbach Grayson analyst Richard Ross in a research note.
Fears of a double-dip recession have kept investors at bay
in recent months. The broad S&P appeared to be finding strength
at the upper end of a trading range between 1,040 and 1,130.
The Dow's gains were limited by McDonald's Corp <MCD.N>,
which dropped 2.3 percent to $74.37 after its August sales in
Europe were softer than expected. []
About 6.27 billion shares traded on the New York Stock
Exchange, the American Stock Exchange and Nasdaq, far below
last year's estimated daily average of 9.65 billion.
Advancing stocks outnumbered declining ones on the NYSE by
a ratio of over 3 to 2, while on the Nasdaq, about 5 stocks
rose for every four that fell.
(Reporting by Edward Krudy; Editing by Kenneth Barry)
