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Stocks rise as lackluster reports ease Fed concern

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By The Associated Press
Thursday, May 30, 2013, 5:15 p.m.

NEW YORK — The stock market rose Thursday after a pair of lackluster economic reports raised expectations that the Federal Reserve will continue to boost the economy with its stimulus program.

Unemployment claims rose and an initial estimate of first-quarter economic growth was revised slightly lower. That suggests the economy may need more time to recover from its funk and that the Fed will keep up its $85 billion in monthly bond purchases.

“The big worry that's been hitting the market lately, that the Fed might step back prematurely, might be fading a little today on the idea that the economy does need a bit more support,” said Jeff Kleintop, chief market strategist at LPL Financial.

The rise in the Standard & Poor's 500 index was led by banking and insurance stocks, which gained 1.1 percent. Among individual bank stocks, Bank of America rose to its highest in more than two years. JPMorgan also climbed.

Banks and other stocks that stand to benefit the most from an improving economy have surged this week, a change from earlier in the year when investors favored dividend-rich stocks like utilities. Now investors are selling dividend-rich stocks and buying so-called growth stocks. The S&P's financial index is up 2.1 percent this week; its utilities index is down 2.5 percent.

Even after this week's gain, by one measure bank stocks are still less expensive than the broader market. The price-to-earnings ratio for financial companies is 14.4 for banks and insurers, compared with 16.2 for all companies in the S&P 500 index, according to FactSet.

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