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Stocks gain brief break from slump

Thursday's increases could be fleeting, however, as investors await the latest jobless figures today for signs of inflation.

Stocks managed their strongest gains in more than a week Thursday as investors sought out bargains or safe bets a day before a key government report on unemployment.

The Dow Jones Industrial Average ended a turbulent session with a gain of 119.05, closing at 10,793.82. The Dow had tumbled 108 points in morning trading before recovering. Broader stock indicators were mostly higher, but any gains were hard-fought and potentially fragile, analysts said. The Standard & Poor's 500 rose 8.38 to 1,313.71, and the Nasdaq composite index rose 25.83 to 2,565.83.

The Nasdaq, heavily weighted with technology stocks, eked out its first gain since July 28. The index is now 10.5 percent below its July 16 record high of 2,864.48, a level that many analysts believe will lure cautious buyers.

"Some of the selling pressure has been relieved, but you certainly can't call it a rally," said Robert Stovall, president of Stovall/Twenty-First Advisers.

Many investors remained off-balance in advance of this morning's Labor Department report on unemployment. Federal Reserve chairman Alan Greenspan told Congress last week that any further decline in the low jobless rate could suggest that inflation is beginning to threaten the economy.

Greenspan already has signaled the Fed's willingness to raise interest rates in a pre-emptive strike against inflation.

Thursday, however, the markets were able to shrug off two possible harbingers of accelerating inflation. The Labor Department's report on productivity and labor costs showed American workers' productivity slowed significantly in the spring, rising at an annual rate of just 1.3 percent. Labor costs surged at an annual rate of 3.8 percent, the worst showing since the end of 1997.

In recent years, increased productivity has enabled U.S. businesses to counteract rising labor costs. But Greenspan has cautioned that investors have been too confident that strong productivity gains would continue.

The uncertain economic news sent some investors heading for conservative consumer stocks that are considered safe under most circumstances. Among the Dow components, IBM shot up $4.68} to $123.18} amid reports it will soon unveil a new, faster way to store information; and American Express picked up $3.62{, closing at $127.12{ after the company's chief executive detailed the company's Internet strategy to investors and analysts.

Traders said the promise of big online spending by a major financial-services firm lent support to a rally by Internet stocks, most of which have been pummeled in recent sessions. A recent slump has left many stocks ripe for purchase at their new, lower prices.

Yahoo!, which traded at $244 on April 6, sank over the next few months. Thursday, it rebounded $7.37{ to $128.37{. Online auctioneer eBay soared $17.12{ to $92.87{, and retailer gained 10\ to 44.

But America Online was one of the biggest decliners in the S&P 500, falling $3.93} to $83.50. AOL is battling competitors over its instant-messaging technology, and Thursday the Wall Street Journal reported Microsoft is working to develop an inexpensive or free dial-up Internet service.

In the meantime, many analysts were unimpressed by the modest rally, pointing out that three stocks fell for every two that rose on the New York Stock Exchange.

"Investors are going to want to study this market carefully," said Tom Madden, chief investment officer for domestic equities at Federated Investors of Pittsburgh. "If we're going to authoritatively proceed, breadth will have to improve."