Stocks edge up as retail gains overshadow Europe

By DAVID K. RANDALL | October 6, 2011 | 11:25 AM EDT

In this Oct. 4, 2011 photo, trader Vincent Quinones, second from right, works on the floor of the New York Stock Exchange. Hopes that Europe is preparing a big plan to shore up its banks gave stocks around the world another lift Thursday, Oct. 6, 2011, ahead of keenly-awaited policy decisions from the European Central Bank and the Bank of England.(AP Photo/Richard Drew)

NEW YORK (AP) — Stocks edged higher Thursday as investors weighed stronger September retail sales in the U.S. against a decision by the European Central Bank not to lower interest rates.

Target, Nordstrom, Macy's and other retailers reported September sales results that beat Wall Street's expectations. While some of the sales were driven by deep discounts, analysts said higher sales figures suggested the U.S. economy was not falling into another recession.

"The market has been pricing in an out-and-out recession, but the fact that consumer spending is holding up shows that we're more likely to continue muddling through at a 1 to 2 percent growth rate," said Brain Gendreau, market strategist at Cetera Financial Group.

The Dow Jones industrial average gained 28 points, or 0.3 percent, to 10,967 as of 11:00 a.m. Eastern.

The S&P 500 rose 4, or 0.4 percent, to 1,148. The Nasdaq composite added 19, or 0.8 percent, to 2,480.

Consumer discretionary stocks led the market higher after the stronger retail sales reports. Target Corp. jumped 4 percent after its September sales beat Wall Street's expectations.

Investors also remained focused on Europe's debt problems. The European Central Bank offered new emergency loans to European banks. It also announced that it would buy bonds issued by banks, making it easier for them to lend.

Investors have been worried that major European banks could face big losses if Greece defaults on its debt, as many expect will happen. That would likely cause the value of Greek debt held by those banks to fall sharply in value. If that causes a big enough shock to those banks they could stop lending to each other, causing another freeze in global credit markets, as happened following the collapse of Lehman Brothers in 2008.

The European Central Bank disappointed some investors, however, by announcing that it would keep interest rates unchanged. Analysts were hoping the bank would cut rates to encourage lending and give a boost to Europe's sagging economy.

In the U.S., the Labor Department said the number of new applications for unemployment benefits rose slightly last month to 401,000. While that is a signal that the job market continues to be weak, the increase was slightly less than what Wall Street economists had predicted, a signs that layoffs are easing. Unemployment benefits typically need to fall below 375,000 to signal job growth.

Corning Inc. rose 3.1 percent after it said it would increase its dividend and buyback shares. Apple Inc. rose 1 percent. The company said company co-founder and former CEO Steve Jobs died Wednesday. Several analysts and large investors said Thursday they believe the company would continue to grow under new CEO Tim Cook.