Stocks edge higher on stimulus hopes

The stock market rose on Thursday after a pair of lackluster economic reports convinced traders that the U.S. central bank 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 U.S. economy may still need some 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," Jeff Kleintop, chief market strategist at LPL Financial, said.

The rise in the Standard & Poor's 500 index was led by banking and insurance stocks, which gained 1.1 percent. 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. The S&P's financial index is up 2.1 percent this week, and its utilities index is down 2.5 percent.

The Dow Jones industrial average closed up 21.73 to 15,324.53. The Nasdaq composite index rose 0.69 percent to 3,491.30. The S&P 500 rose 0.37 percent to 1,654.41.