Weekly applications dropped 1,000 to a seasonally adjusted 367,000 in the week ending May 5, the Labor Department said Thursday. The previous week's figure was revised up slightly.
The Dow Jones Industrial Average rose 48 points to 12,843. The Standard & Poor's 500 gained 9.8 points to 1,360.8. The Nasdaq composite index rose 11.5 points to 2,630.75.
The four-week average for jobless claims, which economists use for a less volatile peek at the employment picture, fell 5,250 to 379,000. When that figure remains consistently below 375,000, it suggests that job growth is strong enough to lower the unemployment rate.
The numbers released by the Labor Department could dispel nascent fears that that strongest yearly start for hiring since the recession ended 2009 was sputtering.
Applications for unemployment benefits rose for most of last month in tandem with weaker hiring in March and April.
There are still signs, however, that companies are still digging out from the recession and a solid hiring environment has yet to take root.
Late Wednesday, a giant in the technology sector spooked the market with a sobering outlook on spending, particularly with Europe weighing on any global recovery.
Cisco Systems Inc. posted strong third-quarter profits, but shares tumbled 8% in premarket trading Thursday on dour comments about the willingness of corporations to make substantial investments.
CEO John Chambers said customers are waiting longer to close deals and they are spending less out of uncertainty about the economy, particularly in Europe and India.
"We are still in an uncertain environment economically," Chambers told analysts in a conference call.
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As talks to form a Greek government dragged into a fourth day, European markets fell.
The FTSE 100 index of leading British shares slipped 0.5% to 5,501 while Germany's DAX fell 0.2% at 6,461. The CAC-40 in France was 1.2% lower at 3,081.
In the U.S., Kohl's Corp. said Thursday that first-quarter profit tumbled 23 percent and the department store chain warned that it may fall short of Wall Street expectations in the second quarter.
The report comes a day after Macy's reported first-quarter earnings. While first-quarter profit rose 38 percent, Macy's shares tumbled after the department store left its guidance unchanged.
Though the company tends to give conservative guidance, investors took it as a sign of a potential slowdown in consumer spending, which accounts for about 70 percent of U.S. economic activity.