Market up 3 Days Consecutively

Stocks rallied Thursday, ending higher for the third-straight session, as investors continued to dig back in after a month long retreat that left the Dow and other major indexes at three-month lows.

A weaker dollar gave a lift to dollar-traded commodities and select blue chips. The morning’s regional manufacturing report and Hewlett-Packard’s quarterly results added to the gains.

The Dow Jones industrial average (INDU) rose 84 points, or 0.8% according to early tallies. The S&P 500 index (SPX) added 7 points, or 0.7%. The Nasdaq composite (COMP) added 15 points or 0.7%.

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Stocks had been volatile through the early afternoon as investors eyed Wal-Mart’s cautious outlook, a jump in weekly jobless claims and a rise in a key inflation indicator.

A number of energy stocks rallied as the dollar turned mixed. Other gainers on the day were concentrated in the bank and tech sector.

27 of 30 Dow stocks rose, led by Boeing (BA, Fortune 500), Chevron (CVX, Fortune 500), IBM (IBM, Fortune 500), Travelers Companies (TRV, Fortune 500), 3M (MMM, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500). HP’s better-than-expected quarterly results fueled its stock gains.

Stocks gained Wednesday thanks to a better-than-expected housing report, a mixed forecast from the Federal Reserve and some upbeat company news. The gains followed a big rally Tuesday.

“The market was due for a rally after all the selling over the last few weeks, so you’re seeing a few days of gains,” said Sean Kraus, chief investment officer at CitizensTrust.

But Kraus said that there were still questions about the same issues that have been dragging on the market over the last few weeks. They include whether Greece’s debt crisis is indicative of a bigger problem in Europe and what China’s decision to pull back bank lending will mean.

Add in Thursday’s weekly jobless claims report and Wal-Mart’s outlook and “it all makes the recovery look tentative,” Kraus said. “When that happens, the market doesn’t know what to do.”

Between recent rally highs hit on Jan. 19 and the lows of early February, the S&P 500 slumped over 9%, while the Nasdaq and Dow lost over 7%. But in the last two weeks stocks have recovered, with the Dow now just over 330 points away from its 2010 high of 10,725.43.

Jobs: The number of Americans filing new claims for unemployment rose to 473,000 last week from a revised 442,000 in the previous week. Economists surveyed by expected 438,000 claims.

Continuing claims, a measure of Americans who have been receiving benefits for a year or more, held steady at 4.563 million versus forecasts for a drop to 4.5 million.

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Quarterly results: Hewlett-Packard (HPQ, Fortune 500) reported higher quarterly earnings and revenue that topped expectations, after the close Wednesday. The company also boosted its outlook for the full year. HP shares rose 1%.

Wal-Mart Stores (WMT, Fortune 500) reported higher quarterly earnings that topped estimates on higher quarterly revenue that missed estimates.

The company also said that sales at stores open a year or more, a retail metric known as same-store sales, fell 1.6% for the quarter, the first quarterly decline. Same-store sales were flat for the year.

Looking out, the company said its U.S. business was likely to continue to struggle in the tough economy. Wal-Mart forecast first-quarter earnings of between 81 cents and 85 cents per share versus forecasts for 85 cents. Wal-Mart shares fell 1.5%.

Economy: Other economic reports released Thursday included the Producer Price index (PPI), a measure of wholesale inflation, the Philadelphia Fed index, a regional reading on manufacturing and the index of leading economic indicators (LEI).

PPI rose a seasonally adjusted 1.4% in January, versus forecasts for a rise of 0.8%. PPI rose 0.4% in the previous month. The so-called core PPI, which strips out volatile food and energy costs, rose 0.3% versus forecasts for a rise of 0.1%. Core PPI was flat in December.

LEI rose 0.3% in January after rising 1.2% in December. Economists thought it would rise to 0.5%.

The Philadelphia Fed index rose to 17.6 in February from 15.2 in January. Economists thought it would rise to 17.

AIG: AIG (AIG, Fortune 500) said it will keep up to 25% of the controversial assets that nearly caused its demise, after previously planning to sell off its entire derivatives portfolio. The company now says it will hold onto up to $500 billion in assets so as to take advantage of the recent recovery in credit markets.

AIG shares were barely changed.

Deficit: President Obama issued an executive order for the formation of a bipartisan debt panel, after the Senate voted last month to kill plans to create a similar commission.

World markets: In overseas trading, European markets rallied, with the London FTSE 100 up 0.9%. Asian markets tumbled, with the exception of the Japanese Nikkei, which gained 0.3%.

The dollar and commodities: The dollar fell versus the euro and gained versus the yen.

U.S. light crude oil for March delivery rose $1.73 to $79.06 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $1.50 to $1118 per ounce. Gold had fallen in the morning after the International Monetary Fund said Wednesday that it would sell another 191.3 tons of gold on top of the 212 tons it has sold since September.

Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.80% from 3.74% late Wednesday. Treasury prices and yields move in opposite directions.

Market breadth was positive. On the New York Stock Exchange, winners topped losers three to two on volume of 600 million shares. On the Nasdaq, advancers beat decliners by a narrow margin on volume of 1.46 billion shares.

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