Blue chips rose slightly Thursday, pushed higher by oil company shares, despite a sharp rise in unemployment claims and mixed holiday sales reports from the nation's retailers.

The Dow Jones industrial average (search) closed up 25.05 points, or 0.24 percent, at 10,622.88 and the Standard & Poor's 500 Index ended up 4.15 points, or 0.35 percent, at 1,187.89. The Nasdaq Composite Index fell 1.24 points, or 0.06 percent, at 2,090.00.

Investors kept a close eye on the retail sector as companies issued their sales reports from a mediocre holiday season. Dow component Wal-Mart Stores Inc. (WMT) was up 76 cents at $54.05 after it confirmed that same-store sales — sales from stores open at least a year — rose 3 percent from a year ago.

"We still cannot conclude whether this was a good Christmas season or a bad Christmas season. The market has a correction tone to it, and so any company reporting negative news is taken to the woodshed and taken down considerably, while companies reporting on the upside have rallied," said Tim Ghriskey, chief investment officer of Solaris Asset Management.

Crude oil futures rose sharply, surging past the $45-per-barrel mark, one day after the Energy Department reported strong inventories of distillate fuels but a decline in crude reserves. A barrel of light crude was quoted at $45.56, up $2.17, on the New York Mercantile Exchange (search).

Exxon Mobil Corp. (XOM) rose nearly 1 percent to $49.90 and ChevronTexaco Corp. (CVX) also climbed 1 percent to $51.32 after crude rose to around $45 a barrel.

The dollar resumed its rally on Thursday. The euro fell against the U.S. currency, ending about five cents below the $1.3667 record high hit a week ago, according to Reuters data. A stronger greenback encourages investments in U.S. assets.

"Oil is strong and that is helping oil companies, but it is surprising the broader market is as strong as it is, given higher oil prices," said Mike Driscoll, managing director at Bear Stearns. "We got off to a rough start this year, and a couple of investors may also be of the perception that we have oversold and the market is due for a lift," Driscoll added.

Although stocks fluctuated, Wall Street greeted the Labor Department's (search) weekly first-time jobless claims report with surprising calm. Jobless claims rose to 364,000 last week, up from 321,000 the week before — the sharpest rise in nearly three years.

Whether Thursday's gains can set a new direction for short-term trading remains to be seen, as the Labor Department on Friday was expected to release its monthly job creation report, a key barometer of the labor market and the nation's economic health. A lower-than-expected number following November's lackluster job growth could send stocks lower.

And combined with another rise in oil prices and news this week that the Federal Reserve sees the potential for worsening inflation, and, in turn, higher interest rates, investors had reason to be nervous.

"No matter how you look at it, this market is facing a headwind," said Hans Olsen, managing director and chief investment officer at Bingham Legg Advisers in Boston. "With these job numbers the way they are and oil rising, and the Fed talking about inflation, you could potentially see a very muted economic recovery and much slimmer returns."

Friday's job report will go a long way in determining whether the three previous sessions' losses will be a short correction or a longer-term trend. While some pullback was expected after the strong finish to 2004, the market was unnerved by the prospect of higher rates, and any attempts to resume Wall Street's post-election rally have met with strong resistance.

Costco Wholesale Corp. (COST) rose 1.4 percent to $47.90 after the largest U.S. warehouse club said December sales rose 9 percent at stores open at least a year. But Target Corp. (TGT) fell 5.4 percent to $48.50 after the discount retailer said it expects fourth-quarter profit to fall short of Wall Street's estimate after increased promotional sales in December.

Federated Department Stores Inc. (FD) saw same-store sales rise 2.3 percent in December, while rival J.C. Penney & Co. Inc(JCP) said its sales fell 1.2 percent, less than Wall Street had forecast. Federated slipped 2 cents to $57.20, while J.C. Penney fell 2 cents to $40.78.

Three retailers reduced their fourth-quarter profit forecasts after seeing sales slump over the holidays. Home decor outlet Pier 1 Imports Inc. (PIR) fell 39 cents to $18.36, teen accessory retailer Claire's Stores Inc.(CLE) lost 57 cents to $20.10, and Lane Bryant and Fashion Bug parent Charming Shoppes Inc. (CHRS) skidded 94 cents to $8.30.

Wall Street's recent penchant for mergers and acquisitions continued as Alltel Corp. (AT) was reportedly in talks to acquire Western Wireless Corp. (WWCA) for $4 billion. The New York Times reported that the deal could be wrapped up by next week, though there were still outstanding issues that could cause it to fall apart. Alltel dropped $2 to $56, while Western Wireless surged $4.70, or 15.16 percent, to $35.70.

In technology news, National Semiconductor Corp. (NSM) gained 19 cents to $17.07 after the chip maker said it would cut about 6 percent of its work force to reduce costs amid a chip supply glut and it will book severance charges for the move. Meanwhile, CSFB upgraded National Semiconductor saying the company's planned exit from low margin business will help earnings.

Trading was active, with 1.5 billion shares changing hands on the New York Stock Exchange, just above the 1.46 billion daily average for last year. About 2.2 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Advancing stocks led declining stocks on the Big Board by a 3 to 2 ratio, while advancers were even with decliners on the Nasdaq.

The Russell 2000 index of smaller companies was up 2.34, or 0.38 percent, at 619.82.

Overseas, Japan's Nikkei stock average rose 0.48 percent. In Europe, Britain's FTSE 100 closed up 0.38 percent, France's CAC-40 climbed 0.71 percent for the session, and Germany's DAX index gained 1 percent.

Reuters and the Associated Press contributed to this report.