The stock market steadied itself Thursday after two sessions of steep declines, rebounding moderately as oil prices stepped back from their frenetic upward run.
Crude futures set another trading record overnight -- moving above $135 a barrel for the first time -- then pulled back below $131, offering some relief for stock investors.
Also helping the market, the Labor Department said the number of workers applying for unemployment benefits declined by 9,000 last week to 365,000. Analysts on average had predicted a slight increase.
Thursday's modest rise in stocks came after the Dow Jones industrial average tumbled 427 points, or 3.3%, over the course of Tuesday and Wednesday. It was the gauge's steepest two-day loss since February.
The Dow rose 24.43 points Thursday, or 0.2%, to 12,625.62.
Broader stock indicators also moved higher. The Standard & Poor's 500 index climbed 3.64 points, or 0.3%, to 1,394.35. The Nasdaq composite index gained 16.31 points, or 0.7%, to 2,464.58.
The Russell 2,000 index of smaller-company stocks jumped 5.90 points, or 0.8%, to 733.01.
Advancing issues outnumbered decliners by about 9 to 7 on the New York Stock Exchange. Even though the major indexes are down sharply this week, stocks are still well above their mid-March lows.
The Dow, off 2.8% this week, remains 7.5% higher than its close of 11,740.15 on March 10, when investors were preoccupied with worries over the soundness of the credit markets. Since then, Wall Street has reshuffled its list of concerns, placing greater emphasis on the well-being of the overall economy, not just the troubled financial sector.
Government bond yields rose sharply Thursday along with stocks. The yield on the benchmark 10-year Treasury note rose to 3.91% from 3.81% late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.
Crude futures slipped $2.36 to settle at $130.81 a barrel on the New York Mercantile Exchange. The surge in oil prices has fanned investors' uneasiness about inflation. The big fear is that Americans worried about rising prices for fuel and food will be less willing to reach into their wallets for other items. Such a pullback could deal a major blow to the U.S. economy because consumer spending accounts for more than two-thirds of the country's economic activity.
In other market highlights:
Ford Motor fell 64 cents, or 8.2%, to $7.16. The company warned that it no longer expected to return to profitability by next year and that it was trimming North American production of pickups and SUVs for the rest of this year because of high gasoline prices and a shaky economy. The automaker also lowered its forecasts for U.S. sales for 2008.
Power wholesaler Calpine jumped $1.71, or 8%, to $22.99. Rival NRG Energy said late Wednesday that it had offered to acquire Calpine for $11.3 billion in stock. NRG fell $2.24, or 5.3%, to $40.27.
Zale surged $2.53, or 14%, to $21.17 after the specialty jeweler reported that sales rose 6% in its latest quarter, topping expectations.
Media General jumped $1.59, or 11%, to $16.40. To reduce operating costs, the newspaper publisher and television station operator plans to cut nearly 11% of its workforce by October.
Dick's Sporting Goods sank $4.29, or 16%, to $22.25. Poor sales at established stores and a soft U.S. economy caused the retailer to cut its 2008 profit forecast.
Moody's fell for a second day after launching a probe into whether the debt rater's staff intentionally failed to fix a computer error that gave top rankings to securities that didn't deserve them. Its stock fell $2.40, or 6.5%, on Thursday to $34.51, putting it down 21% over two days.
In overseas markets, key stock indexes rose 0.4% in Japan and Germany. Shares edged up in France and fell 0.3% in Britain.