The economic news was helped by better-than-expected reports on jobless claims and pending home sales. Plus, retailers reported  favorable August sales.

The Dow Jones industrials ($INDU) were up 51 points to 10,320, their third straight gain and fourth in the last five sessions. The Standard & Poor's 500 Index ($INX) was up 10 points to 1,090, and the Nasdaq Composite Index ($COMPX) was up 23 points to 2,200. 

The unemployment report, which will be released at 8:30 a.m. ET, is always the month's most important economic report. It's especially important this month because of rising fears that the U.S. economic recovery is stalling out. 

Friday's report is expected to show U.S. unemployment rising slightly to 9.6%. 

Private payrolls are expected to grow by perhaps 30,000 while nonfarm payrolls will shrink by 110,000. That's part of the shrinkage in workers employed by the Census Bureau for the 2010 Census. 

Normally, the United States needs to add 100,000 to 150,000 nonfarm jobs a month to absorb the natural increase in the working population and trim the unemployment rate, economists say. 
 
So far this year, the economy has added about 90,000 private-sector workers a month. Most of the increase took place in the early spring. Job growth tapered off over the summer.

Deals help the market

Deals were a part of today's market. Hewlett-Packard (HPQ) finally won computer storage maker 3Par (PAR) with a $33-a-share bid. Dell (DELL), which had earlier bid $32, walked away. 

3Par rose 2.5% to $32.88 and is up 240% since Aug. 9, when Dell offered its first bid for the company. HP was up 1.2% to $39.68, and Dell was up 2% to $12.36.  

In addition, Burger King Group (BKC) agreed to be bought out by  3G Capital for $4 billion, or $24 a share, a 46% premium over Wednesday's closing price. Talk of the potential deal began circulating after reports in The Wall Street Journal and The New York Times. Burger King shares were up 25.1% to $23.59.

A surprisingly broad rally
Today's rally was not only a surprise because it occurred at all, but it was surprisingly broad. Nine of the 10 sectors of the S&P 500 were higher, and 42 of 43 indexes tracked by Market Dispatches showed gains.

The leaders were disk-drive makers, retailers, semiconductors and homebuilders. Metals and energy shares moved higher as gold, copper and crude oil prices moved higher. 

Twenty-four of the 30 Dow stocks were higher, led by Alcoa (AA), up 3% to $10.83. Merck (MRK) was the laggard, down 0.8% to $35.35. 

Ninety stocks in the Nasdaq-100 Index ($NDX.X) were higher, led byFlextronics (FLEX), Broadcom (BRCM) and SanDisk (SNDK). ThePhiladelphia Semiconductor Index ($SOX) was up 7 points to 323.

Crude oil settled up $1.11 to $75.02 a barrel in a rally that accelerated on news of another rig explosion off the Louisiana coast in the Gulf of Mexico. The explosion occurred on a production platform operated by Mariner Energy (ME) south of Vermilion Bay. 

Mariner shares fell nearly 16% on the first reports but recovered most of the loss, finishing off 2.6% to $22.75.

Gold settled up $5.30 to $1,253.40 an ounce. That's $3.80 below its highest close of $1,257.20 on June 18. Gold is up 14.3% this year.

Interest rates were higher, with the 10-year Treasury yield rising to 2.632% from 2.582% on Wednesday. The dollar was lower against major currencies. 

Economy shows small signs of life
What gave the market real support were two economic reports: 

Better jobless claims. The number of new people filing for unemployment insurance fell by 6,000 to 472,000 during the week ended Aug. 28, the Labor Department said. Economists had expected to see an increase of 2,000, according to Briefing.com. Many analysts regard the weekly report is a leading indicator on jobs claims. 

Possible stability in home sales. The National Association of Realtors said the number of contracts to buy previously owned homes rose 5.2% in July, better than expected. Gains were seen across the country, the trade association said. Economists had expected the index to fall 1.1%. The index tumbled a revised 2.8% in June.

The report on pending home sales allayed some fears of a double-dip recession, but it didn't generate much excitement. 

"We’re growing at a mediocre clip," Stephen Stanley, the chief economist at Pierpont Securities in Stamford, Conn., told Bloomberg News. "We just haven’t rebounded sufficiently from the severe recession."

The Commerce Department said factory orders rose 0.1% in July after declining a revised 0.6% in June, falling short of economists' estimates for 0.3% growth. Excluding transportation, orders fell 1.5% in July. Theoretically, the  weak report contrasts with Wednesday's better-than-expected manufacturing report from the Institute for Supply Management. But the ISM report also noted slowing order growth. 

Retailers: August wasn't too bad

Costco Wholesale (COST) said comparable-store sales rose 7%; shares rose 1.4% to $58.59. 

Family Dollar (FDO) said its sales increased 6.1% in its fiscal fourth quarter. Shares were up 0.5% at $43.50.

Kohl's (KSS) said sales were up 4.5% from a year ago; analysts had expected 2.6%. J.C. Penney (JCP) said sales grew 2.3%, but analysts had expected only a 1.6% gain. 

Del Monte drops after trimming guidance

Del Monte (DLM) shares fell 2.5% to $12.83 after the company reduced its full-year sales growth target to 1% to 3%. 

Del Monte's previous sales growth guidance was in the range of 2% to 4%. The company reaffirmed its full-year earnings from continuing operations forecast of $1.38 to $1.42 a share.