Stocks Mixed After Two-Day Rally-

Stocks fluctuated Thursday as investors reacted to a jump in U.S. jobless claims and a profit drop at Sears ahead of a speech in the evening by Federal Reserve Chairman Ben Bernanke.

Stocks had been expected to take a breather after logging their biggest two-day rally in five years Tuesday and Wednesday. Hopes have been growing that financial companies may be recovering from the credit crisis and that the Fed may lower interest rates to calm the markets.

But Thursday's news injected a bit of uncertainty back into the market, and investors remained cautious before Bernanke's comments at 7 p.m. to the Chamber of Commerce in Charlotte, N.C.

If Bernanke echoes Fed Vice Chairman Donald Kohn's recent comments that the turbulent financial markets may require some "offsetting" policy, it would cement the belief on Wall Street that the Fed is open to lowering rates for a third straight time at its meeting Dec. 11. If he does not, jitters may intensify.

"The data's weak, and says to us that the Fed needs to stay engaged here," said Phil Orlando, chief equity market strategist at Federated Investors.

The Labor Department said the number of people seeking unemployment benefits last week jumped sharply, suggesting that the labor market is softening. The weekly readings can, however, be volatile.

Sears Holdings Corp., parent of its namesake department store chain and Kmart, said profits plunged to a penny per share from $1.27 per share a year ago due to lower sales and clearance markdowns.

And although the Commerce Department reported that economic growth in the third quarter was 4.9 percent, faster than originally thought, analysts are anticipating a slowdown in the fourth quarter.

The main culprit, of course, is the housing market. The Commerce Department said sales of new homes rose moderately in October, but prices fell sharply. Also, prior sales figures were revised downward.

In late morning trading, the Dow Jones industrial average rose 3.91, or 0.03 percent, to 13,293.36, after declining in earlier trading.

Broader stock indicators were mixed. The Standard & Poor's 500 index dipped 1.09, or 0.07 percent, to 1,467.93, and the Nasdaq composite index rose 4.52, or 0.17 percent, to 2,667.43.

Bond prices rose, with the yield on the benchmark 10-year Treasury note falling to 3.96 percent from 4.04 percent late Wednesday. Bond prices and yields move in opposite directions. The dollar rose against other major currencies, except the yen, while gold prices fell.

Investors sent stocks sharply higher in recent days in part because a Federal Reserve official suggested another interest rate cut could be in store. Wall Street also has been calmed by evidence that companies hurt by subprime problems have found financial backers to help stem the damage.

In the latest such action, E-Trade Financial Corp. said on Thursday that Citadel Investment Group will provide $2.5 billion in cash to shore up its balance sheet. It also said Chief Executive Mitchell H. Caplan has resigned.

E-Trade, which holds billions in risky mortgage debt, said it will sell its entire portfolio of asset-backed securities to Citadel for $800 million and book a $2.2 billion charge on the sale. E-Trade jumped 51 cents, or 9.7 percent, to $5.79.

Sears' results came up far short of Wall Street's expectations; analysts polled by Thomson Financial had forecast a profit of 50 cents per share. The stock fell $15.88, or 13.7 percent, to $100.46.

Aeropostale Inc. dropped $2.11, or 7.5 percent, to $25.90 after the retailer's third-quarter sales came in below analysts' expectations and a SunTrust Robinson Humphrey analyst downgraded the stock, citing its price. Aeropostale said its quarterly profit rose 11 percent.

The stock market's two-day rebound followed Monday's triple-digit drop in the Dow, which pushed the index to a level 10 percent off its October high - the measure of a downward correction. But while the advance was impressive, Wall Street's performance since the summer has been highly erratic, with many triple-digit swings, and there were few if any predictions that stocks were now on a solidly upward path.

Declining issues outnumbered advancers by about 9 to 5 on the New York Stock Exchange, where volume came to 395.3 million shares.

The Russell 2000 index of smaller companies fell 0.27, or 0.04 percent, to 769.77.

Overseas stock markets were higher. Britain's FTSE 100 rose 0.32 percent; Germany's DAX index rose 0.29 percent and France's CAC-40 rose 0.60 percent. In Asia, Japan's Nikkei stock average closed up 2.38 percent. Hong Kong's Hang Seng index rose 4.06 percent.