Wall Street edges higher after Philly Fed data

NEW YORK (Reuters) - U.S. stocks rose on Thursday, boosted by a read on factory activity that was much stronger than expected, although investors continued to grapple with the prospect of an earlier-than-expected rate hike.

Wall Street opened lower but reversed course after the Philadelphia Federal Reserve Bank said its business activity index rose far more than expected in March, rebounding after a contraction in February. [ID:nZON024N00] In another positive report, jobless claims rose less than expected in the latest week. [ID:nL2N0MH0HE]

The data "shows that fundamentals are getting stronger every day, and that strength is getting firmer," said Frank Davis, director of sales and trading at LEK Securities in New York.

Financial shares, which are tied to the pace of economic growth, were among the biggest gainers on Thursday, with the S&P financial group <.SPSY> up 1.1 percent. JPMorgan Chase & Co gained 2.2 percent to $59.58 while Citigroup Inc added 1.9 percent to $49.87.

In her first press conference as chair of the Federal Reserve, Janet Yellen on Wednesday indicated that the first increase in interest rates could come early next year, estimating the "considerable period" between the end of the Fed's stimulus and its first rate increase at possibly six months. Analysts widely expected a hike in the second half of 2015.

"We're trying to decipher her timeframe and get ahead of it," said Davis. "While we didn't make any drastic changes to our positions as a result of what she said, we have a tight watch on her to figure out how she'll play her hand."

The Dow Jones industrial average <.DJI> was up 65.60 points, or 0.40 percent, at 16,287.77. The Standard & Poor's 500 Index <.SPX> was up 6.47 points, or 0.35 percent, at 1,867.24. The Nasdaq Composite Index <.IXIC> was up 15.85 points, or 0.37 percent, at 4,323.45.

The S&P 500 is within 1 percent of its record closing high, but volume has been anemic on positive market days, suggesting limited conviction behind the move. According to the latest Reuters poll of analysts, the S&P is expected to end 2014 at 1,950, less than 5 percent above current levels.

Volume is expected to surge on Friday as options expiration takes place alongside multiple index rebalances. Credit Suisse estimates $14 billion in gross trading will stem from the S&P 500 index rebalance, with another $6 billion coming from rebalancing in other indexes.

Geopolitical concerns continued to be in focus as Russian troops seized two Ukrainian naval bases, including a headquarters in the Crimean port of Sevastopol. The United States warned Russia that it was on a "dark path" to isolation in the biggest crisis between the two countries since the Cold War.

While few U.S. companies have outsized exposure to the region, investors are concerned about the fallout from any escalation in tension.

Lennar Corp reported a sharp jump in its first-quarter profit, helped by higher prices. The results come a day after KB Home posted similarly strong results in a bullish read on the housing market. Shares of Lennar dipped 0.1 percent to $41.24.

Jabil Circuit Inc forecast 2015 core earnings above Wall Street estimates as the struggling contract electronics maker expects to recover from the loss of its business with BlackBerry Ltd . Shares dipped 0.7 percent to $18.13.

U.S. shares of GlaxoSmithKline fell 1.4 percent to $53.93 after an experimental cancer vaccine failed in a second test, but the British pharmaceutical company said it still hoped to identify a sub-group of patients in which it would work.

(Editing by Nick Zieminski)

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