By Caitlin Ostroff and Caitlin McCabe 

U.S. stocks turned a bit higher Thursday as investors weighed optimism over stronger-than-expected earnings against signs that the labor market is still struggling to recover.

The S&P 500 and Dow Jones Industrial Average all rose in recent trading after swinging between gains and losses throughout the day. The broad benchmark index advanced 0.2%, while the Dow added about 40 points, or 0.1%.

The Nasdaq Composite gained 0.6%, propelled higher by companies including Apple and Amazon.com.

Despite a turbulent start to 2021, U.S. stocks have largely continued to climb higher, with all three indexes currently up 1.8% or more for the year. The Russell 2000 index of small-cap stocks has risen 8.6% year-to-date.

Driving some of those gains has been optimism that more economic recovery may be ahead under President Biden's new administration. Mr. Biden has called for a $1.9 trillion Covid-19 relief plan that includes direct payments to households and more money for testing and vaccine distribution. On Wednesday, the day that Mr. Biden took office, the S&P 500 and the Dow posted their best Inauguration Day performances since Ronald Reagan was sworn in in 1985.

Better-than-expected earnings reports have also buoyed markets recently.

Still, financial markets and the U.S. economy face major obstacles, with fresh data Thursday underscoring that the labor market continues to struggle to recover. The Labor Department said that 900,000 Americans filed first-time claims for unemployment benefits for the week ended Jan. 16, as companies continued to lay off workers amid a surge in Covid-19 cases.

Meanwhile, the U.S. reported 4,200 deaths for Wednesday, the second-highest daily number ever.

Many investors are still betting on an economic recovery this year as Covid-19 vaccinations ramp up, increasing prospects for future earnings. Traders are watching earnings closely to see if they support the strong run across markets in recent months.

Technology stocks have been among the recipients of investors' attention lately, a signal that traders remain interested in the same kinds of companies that led stocks out of the pandemic-induced market trough last year. Apple gained 3.1% Thursday, while Amazon.com added 2.1%. Snap added 3.5%.

Shares of Travelers, a major property-casualty insurer, climbed 2.4% after it logged an increase in quarterly profit and a modest rise in net written premiums. Regional bank KeyCorp rose 1.1% after it recorded higher revenue and a larger profit, with increased activity in its consumer-mortgage and investment-banking businesses driving fees.

Chip giant Intel and International Business Machines are slated to report results after markets close.

"Earnings season looks relatively good and seems to confirm this picture that the U.S. -- because there was no full lockdown -- did well in the fourth quarter," said Carsten Brzeski, ING Groep's global head of macro research. "Stock markets are really looking through the short-term outlook for the economy, which has worsened over recent days."

Investors are paying close attention to corporate guidance in the sectors most affected by the pandemic. Shares of United Airlines fell 6.7% after the airliner said on Wednesday it expected the coronavirus to continue to weigh on travel demand this year.

In other corporate news, Ford Motor climbed 8.7%, on pace for its highest close since January 2018. Shares of the company have jumped on upbeat analyst notes . Ford also holds a stake in electric-vehicle startup Rivian Automotive, which raised another $2.65 billion earlier this week.

Supporting markets is the expectation that central banks and governments will step in if financial conditions deteriorate. This has encouraged investors to seek out higher returns, including in overseas markets.

Japan's Nikkei 225 Index rose 0.8% Thursday and is trading near its highest level in 30 years. India's benchmark stock gauge, the S&P BSE Sensex Index, hit a record high Wednesday. Indexes in China and South Korea rallied Thursday, with the Shanghai Composite up 1.1% and Korea's Kospi gaining 1.5%.

The backstop from governments and central banks -- plus consensus among investors for a strong economic recovery this year -- has squeezed volatility out of the market. The Cboe Volatility Index, known as the VIX and seen as Wall Street's fear gauge, was at 21.82 Thursday, down from 25.16 a month ago.

A day after Mr. Biden was inaugurated, money managers are keeping a close eye on his proposed Covid relief package, and the prospects for it proceeding through Congress.

While stocks have taken their cue from the stimulus plans, investors in bonds have been more skeptical of a big spending push, keeping yields relatively subdued, said Daniel Morris, BNP Paribas Asset Management's chief market strategist.

The yield on the benchmark 10-year Treasury note ticked up to 1.104% Thursday, from 1.089% Wednesday. Yields rise when bond prices fall.

"At least one part of the market is saying 'nice idea,' but if you really thought you'd get $1.9 trillion in stimulus, yields would be higher," said Mr. Morris.

Overseas, the pan-continental Stoxx Europe 600 added less than 0.1% after the European Central Bank held steady on interest rates.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com.

Write to Caitlin Ostroff at caitlin.ostroff@wsj.com and Caitlin McCabe at caitlin.mccabe@wsj.com

(END) Dow Jones Newswires

January 21, 2021 14:47 ET (19:47 GMT)

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