Wall Street up, but credit card firms pummeled

The Dow Jones Industrial Average rose 41.78 points (0.36 per cent) to close at 11,499.25, while the S&P 500 index, a broader measure of the market, rose 7.64 points (0.62 per cent) to 1,242.87.

The tech-rich Nasdaq advanced 20.09 points (0.77 per cent) to 2,637.31.

In the last hour of trade, stocks of credit card companies Visa and MasterCard slumped 12.7 per cent and 10.3 per cent respectively after news that the Federal Reserve moved to reform debit card transaction fees.

The proposals would place a cap on the amount card companies can charge retailers in processing fees, potentially costing them millions in revenue.

"The rules proposed by the Federal Reserve today will have a dramatic impact on the cost of banking services for consumers nationwide," said Edward Yingling, president of the American Bankers Association.

"They essentially relieve retailers of paying their fair share for a card payments system that offers them tremendous benefits," he said in a statement.

"This kind of government interference in marketplace pricing is a big concern for banks of all sizes."

The broader market opened slightly higher on the back of the strong data but then dipped into negative territory, only to recover in the last two hours of trading.

"We had three days of a pause to collect ourselves after the run-up in early December, then today we got good economic data," said Scott Marcouiller of Wells Fargo Advisors.

New claims for US unemployment benefits fell last week to almost the lowest level of the year to 420,000, down 3,000 from the prior week's revised reading of 423,000, the Labor Department said.

The decline beat forecasts of a rise to 425,000.

Other data also showed a 3.9 per cent surge in construction of new US housing in November, led by a sharp rebound in starts of single-family homes, the government reported.

Data also showed a surge in manufacturing activity in the Philadelphia region in December.

Some analysts linked the fluctuations to nervousness on the trading floor ahead of what is known as the "quadruple witching" day on Friday, where four types of equities contracts expire.

In corporate news, business software giant Oracle reported a 28 per cent rise in profits in the last quarter to $1.9 billion, beating analysts' expectations. Its shares rose by nearly four per cent in after-hours trading.

Shares of shipping giant Fedex rose two per cent after it reported an 18 per cent drop in quarterly profit from last year to $283 million, but issued a strong earnings forecast for 2011.

And shares of Bank of America, the largest US bank in assets, rose 1.9 per cent after the Wall Street Journal reported it was negotiating a settlement over the foreclosures scandal that has plagued banks in recent months.

The bond market rose slightly.

The yield on the 10-year Treasury bonds fell to 3.48 per cent from 3.52 per cent on Wednesday, while that of the 30-year bond slipped to 4.58 per cent from 4.60 per cent. Bond prices and yields move in opposite directions.