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By MATTHEW CRAFT and DAVID K. RANDALL, AP Business Writers Matthew Craft And David K. Randall, Ap Business Writers – Thu?Dec?16, 5:40?pm?ET

NEW YORK – A small drop in unemployment claims and a higher profit forecast by FedEx Corp. helped push stocks to two-year highs Thursday.

The Labor Department said first-time claims for unemployment benefits fell last week to 420,000, the third drop in four weeks. The four-week average of claims also slid for the sixth straight week, reaching the lowest level since July 2008. That was before Lehman Brothers collapsed and markets seized up at the height of the financial crisis.

Separately, the Commerce Department said housing starts rose slightly last month, reversing a two-month decline.

Card companies fell sharply after the Federal Reserve proposed as 12-cent cap on the fees that merchants pay every time a customer uses a debit card. Merchants now pay a fee that ranges between 1 to 2 percent of each transaction.

The proposal could cut revenues for major banks and card networks like Visa Inc. and MasterCard Inc. Visa fell 12.7 percent to $67.19. MasterCard fell 10.3 percent to $223.49.

FedEx Corp. rose 1.9 percent to $94.22 after the company raised its earnings predictions for next year because businesses and consumers are shipping more packages. Traders took that as a sign the economy is improving.

The Dow Jones industrial average rose 41.78, or 0.4 percent, to 11,499.25. The broader Standard & Poor's 500 index rose 7.64, or 0.6 percent, to 1,242.87. The Nasdaq composite rose 20.09, or 0.8, to 2,637.31.

Gains came across the market. All 10 company groups in the Standard and Poor's 500 index rose.

Alcoa Inc. was the biggest gainer of the 30 stocks that make up the Dow index, rising 3.5 percent to $14.45. American Express Co. fell the most. The company lost 3.4 percent to $44.57.

Stocks have had a strong December. The Dow index has gained 4.5 over the last month. The S&P 500 has risen 5.3 percent.

A bill to extend Bush-era tax cuts along with unemployment benefits was postponed by the House of Representatives Thursday afternoon. The Senate passed the bill Wednesday. The tax package, a compromise between the White House and Senate Republicans, is expected to boost economic growth next year but also widen the budget deficit.

House Democratic leaders say they'll pass the bill, but only after first voting whether to raise the proposed rate for the estate tax.

The yield on the 10-year Treasury fell to 3.42 percent from 3.53 percent the day before. Investors have been selling Treasurys as their outlook on the economy improves, sending yields on the bonds higher. The 10-year yield traded as low as 2.49 percent as recently as Nov. 4.

The dollar fell 0.2 percent against an index of six heavily traded currencies. Gold fell 1.1 percent.

Two stocks rose for every one that fell on the New York Stock Exchange. Consolidated volume came to 4.4 billion shares.

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The negative sense means Mediterranean markets have suffered their worst single day in the life of monetary union so far, with the euro hit a minimum of two months against the dollar at just over $ 1.30.

While bonds battered the Ireland Portugal and the Spain remained under pressure, other countries responsible for debt found themselves focused, with spreads in Italian pasta and Belgium bonds reached their highest level since the euro began.

Predatory continued Tuesday, while the euro falling under the mark of $1.30 for the first time since mid-September. Meanwhile, the Central Bank of the Portugal warned the sector banking deal "at risk" intolerable if Lisbon not consolidate public finances.

"The European credit market is in panic mode due to fears of insolvency," Boris Schlossberg, Director of research at GFT FX in New York, said the day. "Irish refloating effort was not enough and therefore the construction of pressure."

However, the situation is on Wednesday as investors bet that the European Central Bank (ECB) would announce plans to increase its purchases of government bonds to support more weak members of the euro area.

FTSE enjoyed the largest gathering of a day in three months, up to 2 1pc, while yields on eurozone sous - nations debt falling pressure, improved signage feeling on the conduct of their duties.

Markets seized the harmless-sounding observations Mr. Jean-Claude Trichet, President of the ECB, late Tuesday boards that officials of the Central Bank could accelerate massively purchasing obligations.

"We see that we decide in the future," he said. "This is the decision of the Board of Directors fully." But this program is underway. ?

Some hoped that the ECB would unveil plans for as much as EUR 1 billion (￡ 850bn) purchases of debt on Thursday when it announced its monthly decision on rates.

They were disappointed when Mr Trichet made any concrete commitments to strengthen the bond purchases, instead of it he has simply promised to extend the installation of liquidity of emergency of the Bank for the Bank until the end of the month of March.

The euro has plunged at the outset, but retailers reported as soon as the ECB had begun its sovereign bonds more aggressive purchases since may, taken move as an attempt to show the markets that the authorities were willing to act.

"That said the ECB and that they are two very different things, Kathleen Brooks, an analyst at Forex.com, pointed out."

After negotiation volatile, the euro has reduced its losses and yields on Spanish, Portuguese and other obligations decreased sharply, demonstrating that action the ECB was able to reassure.

"The crisis in Europe is still strong", Dominique Strauss-Kahn, Director General of the international monetary fund has warned however, adding that the Greece and Ireland - two countries which have received bail - are "at the edge of the cliff" but other nations are not far behind.

Friday, at the edge of the euro and that the ECB has continued to buy bonds in the euro area and the austerity of Spanish Government approved measures, easing fears about its debt.

However, the most dramatic is imminent, Irish politicians to vote Tuesday on austerity budget the deeply unpopular government, on which she IMF-deal hinges.

The main opposition parties likely to win the power at the beginning of next year, said Friday that they want to renegotiate the agreement.

On a broader level, do not think that bond purchases the ECB will solve the problems of debt of the euro area, the message of RBS.

"They are very alive and it is just a temporary fix," Andrew Roberts, head of European interest rate strategy the Bank, warned in a note.

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They are cautious consumer spending represents 70pc of US GDP but with nearly 1 in 10 unemployed workers.

However, growth in gross domestic product between July and September is not smart enough far at the rate of unemployment or to change the perceptions of the monetary easing of the Federal Reserve next week.

While the u.s. commerce Department reported consumption expenditure increased by 2 6pc - 2 2pc in the previous quarter - up and business investment continued to grow, much of the increase in demand has been greeted with - 17pc - imports and domestic goods continued to accumulate in warehouses, suggesting a tepid growth in the fourth quarter.

Consumers are cautious consumer spending accounts for 70pc of US GDP but with nearly 1 in 10 unemployed workers.

In the third quarter - registration as a percentage of disposable personal income - personal saving rate was 5 5pc, compared to 5 9pc in the second.

Today's GDP figure is on the second quarter when more world wide economy grew at an annual rate of 1. 7pc, but the first when it is developed by 3. 7pc.

"The economy is recovering, but recovering at a sluggish pace, and this will certainly contribute to the fed in its deliberations Tuesday, said Hugh Johnson, Hugh Johnson Advisors in Albany, New York Chief Investment Officer."

GDP report showed preferred as the Fed, personal consumption expenditures (PCE) index excluding food and energy, inflation has increased at an annual rate of 0 8pc in the third quarter.

This is the smallest increase since the fourth quarter of 2008 and well below the Fed inflation .the comfort zone' index increased by 1 in the second quarter percentage point.

Analysts expect the fed to announce bond purchases of approximately $ $ per month on Wednesday.

Estimate the growth is subject to revision.

Residential construction has also been a drag on growth during the third quarter, reflecting the end of a tax credit for public acheteurs.Dépenses made a modest contribution to investment by the State and local governments, growth fell in the third quarter after the rise in the prior period.

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