NEW YORK -- The stock market finally got a deal in Greece, but it didn't produce much of a rally.
U.S. stocks rose Thursday morning after Greece announced an agreement to cut costs and keep from defaulting on its debt next month, an event that could have shocked the world financial system.
But stocks dropped later in the morning and never returned to their highs for the day. Analysts cautioned that the market had expected the deal in Greece and warned that Europe still faced problems.
"We still have a lot of wood to chop," said Jeremy Zirin, chief equity strategist at UBS Wealth Management.
Earlier in the day, the Dow was as high as 12,924.71, its highest level during a trading day since May 20, 2008. That was also the last day the average traded above 13,000.
In the afternoon, the S&P; rose as high as 1,354.32, more than double its level on March 9, 2009, the low for stocks during the Great Recession. It last closed at double the low last July. The Nasdaq is trading at its highest level since December 2000.
The markets have had a strong start this year, mostly because of optimism about the economy. The Dow has gained 5.5%, the S&P; 7.5%. But Zirin said the markets had assumed Greece would reach a deal to keep from defaulting, which is why stocks didn't skyrocket on the news.
The deal calls for Greece to make steep cuts in government jobs and spending. Greece's so-called troika of lenders -- the European Union, the European Central Bank and the International Monetary Fund -- insisted on the cuts.
The cuts are one condition of a (euro) 130 billion bailout for Greece, without which it can't afford (euro) 14.5 billion worth of bond payments due March 20.
But the cuts will be hard to implement in a country that has grown used to profligate government spending. Workers are already protesting that job cuts and pay cuts have been too severe.
The country has missed other targets for reducing its debts. It also still has to persuade private investors to agree to losses on their holdings, which will make those investors less likely to buy Greek bonds in the future.
And other European countries, notably Portugal and Italy, still have long-term debt that economists warn could be unsustainable.
Nigel Travis, CEO of Dunkin' Brands, said the agreement in Greece will be a psychological boost for consumers. And when they feel good about the economy, they're more likely to spend, regardless of whether their wealth is directly affected, he said.
But Travis, whose company runs Dunkin' Donuts and Baskin-Robbins, said Greece wasn't the most pressing problem facing his franchisees. They're more concerned about the U.S. presidential election and getting clarity on whether terms for government-backed small-business loans will change and whether a cut in the Social Security payroll tax will be extended.
"I think it's good news," Travis said of the Greece deal. "Whether it actually solves the euro problem, you have to question."
The euro rose slightly against the dollar to $1.33, its highest level in two months. Bond prices fell slightly. The yield on the U.S. government's benchmark 10-year note rose to 2.04% from 1.99% Wednesday.
Stocks were also helped Thursday by U.S. jobs data. The number of people seeking unemployment assistance fell to its lowest level since April 2008.
Apple closed in on $500 per share and set an all-time high after reports that it will unveil the iPad 3 at an event in March. The stock has been on a tear for six weeks, rising 22% since the start of the year and securing Apple's place, at least for now, as the world's most valuable company by market cap, ahead of Exxon Mobil.
Last month, the company that transformed how Americans listen to music, check email and share photos announced that sales of the iPhone and iPad more than doubled in the last three months of last year. Apple stock closed at $493.17, up almost 4%, after touching a record high of $496.75. That's up from $405 just since Dec. 30.
But other stocks didn't fare so well. Among losers for the day:
-- Diamond Foods, maker of Emerald Nuts and Pop Secret popcorn, plunged 37%. It announced late Wednesday that it was ousting its top two executives amid allegations of improper accounting.
-- Groupon, the daily deal website, fell 14% after it announced a surprising quarterly loss in its first earnings report as a public company.
-- TripAdvisor, the website where travelers can post advice and reviews, lost 15% after it missed analysts' earnings expectations. Like Groupon, TripAdvisor was also making its first earnings report as a public company. The website spun off from Expedia in December.
-- PepsiCo fell 4% after announcing it will cut 3% of its workforce, a defense against higher costs for materials.