US STOCKS-Upbeat data, financials buoy Wall St

* Claims data, Philly Fed add to recovery hopes

* Financials, healthcare lead S&P 500 higher

* Dow up 1 pct, S&P up 1.2 pct, Nasdaq up 0.4 pct

* For up-to-the-minute market news click [STXNEWS/US]
(Updates to midafternoon, changes byline)

By Leah Schnurr

NEW YORK, June 18 (Reuters) - U.S. stocks gained on
Thursday after a recent small pullback as data on the jobs
market and regional manufacturing revived hopes that the
recession-hit economy is stabilizing.

Government data showed that while the amount of workers
filing new claims for jobless benefits rose last week, the
number of people collecting aid after the first week fell for
the first time since January. For details, see [ID:nN18379372]

As well, manufacturing in the U.S. Mid-Atlantic region in
June contracted much less than expected, and less than in the
previous month. Economic optimism has spurred stocks as much as
40 percent from 12-year lows, but analysts have said signs of
real improvement will be needed to sustain the rally.

"It really paints a picture of an economy that continues to
have a tough road to hoe, but at the end of the day the good
news is getting better and the bad news is getting less
frequent," said Burt White, chief investment officer at LPL
Financial in Boston.

"The velocity of the bad news is slowing down, which lends
a backdrop for a pretty good baseboard for equities to move
higher."

Financial and healthcare stocks led the way higher. Lincoln
National (LNC.N: Quote, Profile, Research) was up 7.4 percent at $16.00 after an upgrade
from Credit Suisse, and the KBW insurance index rose 1.9
percent. The S&P financial index gained 2.5 percent.

The Dow Jones industrial average .DJI gained 86.01
points, or 1.01 percent, to 8,583.19. The Standard & Poor's 500
Index .SPX rose 10.49 points, or 1.15 percent, to 921.20. The
Nasdaq Composite Index .IXIC added 6.66 points, or 0.37
percent, to 1,814.72.

Friday marks the end of the two-day quadruple witching
period, referring to the expiration and settlement of June
stock and index futures and options, which may increase
volatility. In the midafternoon, the CBOE Volatility Index
.VIX was down 5.3 percent and below the psychologically
important 30 level.

Shares of healthcare companies and other defensive names --
deemed better positioned to withstand a still uncertain economy
-- also buoyed the market. Merck & Co Inc (MRK.N: Quote, Profile, Research) jumped 4.3
percent to $25.84, while McDonald's Corp (MCD.N: Quote, Profile, Research) gained 2.2
percent to $58.64.

On the downside, Caterpillar Inc (CAT.N: Quote, Profile, Research) shed 1.9 percent
to $34.14 after the heavy machinery maker said its retail sales
of machines had fallen at a faster pace in May.
[ID:nN18388033]

After a nearly 4 percent pullback over the past three
sessions, the broad S&P 500 is up about 36 percent from March's
12-year low.
(Editing by Padraic Cassidy