NEW YORK (Reuters) - Stocks rose on Thursday as investors poured into beaten-down financial stocks on growing optimism the worst may be over for banks, and after jobs and manufacturing data pointed to a resilient economy.

Investors also took heart after Merrill Lynch & Co (MER.N) left its dividend unchanged and Credit Suisse (CSGN.VX) cut its exposure to risk. Some took this as a sign that financial companies are stabilizing and the credit crisis was nearing an end.

Fresh data also helped ease worries about the economy. In the latest week, fewer people applied for U.S. jobless benefits, while a measure of the appetite of companies to invest came in stronger than expected within the March report on U.S. durable goods orders.

The optimism surrounding the outlook for banks spread to insurance stocks, after Travelers Cos Inc (TRV.N), one of the largest U.S. property insurers, raised its profit forecast. Shares of American International Group (AIG.N), the industry leader and a Dow component, soared 7.1 percent to $46.97.

“The growing consensus is that we’ve seen the worst in the financial sector and the economy overall. People are willing to take more risk by getting more exposure in equities. We’ve seen that evidenced in today’s rally,” said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

The Dow Jones industrial average (.DJI) advanced 85.73 points, or 0.67 percent, to end at 12,848.95. The Standard & Poor’s 500 Index (.SPX) rose 8.89 points, or 0.64 percent, to 1,388.82. The Nasdaq Composite Index (.IXIC) gained 23.71 points, or 0.99 percent, to 2,428.92.

For the Nasdaq, Thursday’s gain marked the highest close since early January. During the session, the Dow topped 12,900 for the first time since January.

MICROSOFT DROPS LATE ON OUTLOOK

However, after the close, shares of Microsoft Corp (MSFT.O) dropped 4.7 percent to $30.30 as the software maker posted quarterly revenue and a June quarter earnings outlook at the low end of Wall Street’s expectations.

In the regular session, shares of Merrill gained 7.1 percent to $48.09.

Ford Motor Co’s (F.N) unexpected return to profit for the first time in three quarters offered a ray of hope for U.S. manufacturing amid the economic slowdown. Strong results in Europe helped Ford’s earnings, sending its stock up 11.7 percent to $8.40.

“It certainly was a surprise, given the overriding economic environment,” James said.

In the commodities sector, the June crude oil contract fell $2.24 to settle at $116.06 a barrel on the New York Mercantile Exchange as the dollar strengthened and eased some worries about inflation.

Positive broker views on Apple Inc (AAPL.O) also boosted sentiment. Shares of Apple, which reported results late Wednesday, rose 3.7 percent to $168.94 on Nasdaq. Morgan Keegan upgraded the stock while several analysts raised their price targets and estimates on the iPod maker early on Thursday.

The financial sector gave the Dow and S&P 500 their biggest boost, with the S&P index of financial shares (.GSPF) climbing 3.8 percent.

Shares of Travelers rose 5 percent to $50.68.

SOME HOPE FOR BUSINESS SPENDING

A dip of 0.3 percent in March durable goods orders was mostly due to a big drop in orders for transportation goods, according to data released by the U.S. Commerce Department. That report included an encouraging sign: Shipments of non-defense capital goods excluding aircraft, a closely watched proxy for businesses’ capital spending, jumped 1.2 percent in March. That suggested the potential for stronger foreign demand for U.S. equipment.

Trading was moderate on the New York Stock Exchange, with about 1.45 billion shares changing hands, below last year’s estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.35 billion shares traded, above last year’s daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on the NYSE by about 2 to 1 and on the Nasdaq by about 9 to 5.