NEW YORK - Wall Street showed a modest advance Wednesday in the final session of a dreadful year as investors took some comfort from a sharp drop in weekly unemployment claims and focused on the prospects for 2009.
Trading is expected to proceed quietly because many investors have closed their books on the year. The Dow Jones industrial average is down 35 percent for 2008, while broader indexes are down about 40 percent. It marks the worst year for the Dow since 1931. Wall Street is hoping the economy will rebound in the second half of 2009.
The market was heartened by a government report that initial applications for unemployment benefits fell by 94,000 to 492,000 for the week ending Dec. 27. The drop, which partly reflects seasonal adjustment difficulties tied to the Christmas holiday, was greater than analysts had expected. But the number of people still claiming benefits has climbed to the highest level since 1982.
Wednesday's gains couldn't erase the enormous losses of the past 12 months but investors would nonetheless like to hold or add to the sizable gains made Tuesday when financial shares led stocks higher.
"The tone is less onerous for stocks," said Steven Goldman, chief market strategist, Weeden & Co. in Greenwich, Conn. He said lighter volume and relief that the year is over is likely aiding the market's advance.
"There's maybe a little bit of optimism," he said. "We all start the track record over again."
In midmorning trading, the Dow Jones industrial average rose 63.72, or 0.74 percent, to 8,732.11.
Broader stock indicators also rose. The Standard & Poor's 500 index 6.16, or 0.69 percent, to 896.80, and the Nasdaq composite index rose 15.82, or 1.02 percent, to 1,566.52.
The Russell 2000 index of smaller companies rose 7.26, or 1.50 percent, to 490.03.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to a light 122.1 million shares.
On Tuesday, stocks rose as investors applauded the government's decision to extend $5 billion to General Motors Corp.'s troubled financing arm, GMAC Financial Services LLC. Major stock indexes rose more than 2 percent in light trading, including the Dow, which added 185 points. Light volume can skew market moves.
Bond price fell Wednesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.09 percent from 2.06 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.09 percent from 0.06 percent Tuesday.
The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude fell 87 cents to $38.16 a barrel on the New York Mercantile Exchange.
Overseas, Britain's FTSE 100 rose 0.94 percent in afternoon trading and France's CAC-40 added 0.03 percent. Markets in Japan and Germany were closed for holidays.
