Progress in Italy, Greece on debt sends stocks up

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NEW YORK (AP) — Stocks edged higher Thursday on an unexpected drop in unemployment claims and signs of progress in Europe’s debt crisis. The gains came a day after the Dow Jones industrial average dropped nearly 400 points.

Wednesday’s losses were the worst for the stock market since the volatile trading in August. Traders are concerned that a debt crisis in Italy and Greece might lead to a painful global recession.

Those worries eased Thursday after Italy sold $6.8 billion worth of debt at rates that were more favorable than analysts expected. Investors were also relieved by talk that the leading economist Mario Monti is likely to replace Premier Silvio Berlusconi, who was seen as an obstacle to meaningful economic reforms. Italy’s benchmark borrowing rate eased back below 7 percent after spiking above that level the day before.

There were also signs of progress in Greece, the other focus of Europe’s debt crisis. A day after a breakdown in power-sharing talks in Greece jolted financial markets, senior banker Lucas Papademos was named prime minister of a new coalition government. Papademos, a former vice president at the European Central Bank, is tasked with passing austerity measures being demanded by international lenders.

In the U.S., the number of applications for unemployment benefits fell to 390,000 last week. That was the lowest level since mid-April and a sign that the job market may be improving. Economists had expected 400,000 applications.

The Dow was up 44 points, or 0.4 percent, at 11,824 as of 11 a.m. It plunged 389 points Wednesday after Italy’s borrowing rates soared to a dangerous level and talks in Greece on naming a new prime minister broke down.

The Standard & Poor’s 500 index gained 2, or 0.2 percent, to 1,231. The Nasdaq composite fell 11, or 0.4 percent, to 2,610.

In corporate news:

— Cisco Systems Inc. rose 6.3 percent after its quarterly results beat Wall Street’s estimates.

— Green Mountain Coffee Roasters Inc. plunged 30 percent after its revenues fell short of analyst expectations.

— Viacom Inc., owner of MTV Networks and Comedy Central, rose 0.4 percent after it earned more than analysts predicted. Most of the increase was due to its Paramount Pictures division.