NEW YORK (CNNMoney) -- Investors have been betting on a Greek austerity deal all week, and now that it's finally here, they're breathing a sigh of relief. U.S. stocks closed modestly higher Thursday following a morning of choppy trading.
The Dow Jones industrial average () rose 6 points, or less than 0.1%, to end at 12,890. The S&P 500 ( ) added 2 points, or 0.2%, to 1,352. The Nasdaq composite ( ) gained 11 points, or 0.4%, to 2,927.
Stocks opened higher on news that Greek political parties have finally reached an agreement on austerity measures, which sparked some optimism that the troubled nation will be able to secure more bailout funds and avoid a default. But the market struggled to maintain its momentum, drifting lower in the morning before recovering in the afternoon.
The deal, which was presented to euro-area finance ministers, marked the first step toward securing a €130 billion bailout from the European Union, International Monetary Fund and European Central Bank. Greece needs the money in order to make its payment on a €14.5 billion bond redemption next month
Though the progress is encouraging, the situation in Greece still remains highly uncertain.
"The market has been waiting for this news for weeks," said Art Hogan, managing director at Lazard Capital Markets. "It's a step in the right direction but it has been expected, so that's why the reaction is rather muted."
Hogan added that investors will continue to keep close tabs on any new progress out of Greece, which also appears close to a deal with its private-sector creditors to write down a portion of the nation's debt.
Stocks have gotten off to a strong start in 2012, so investors may also be hesitant to push stocks much higher, Hogan noted. The Nasdaq is up almost 12%, while the S&P 500 has climbed 7% and the Dow had added more than 5%.
Stocks edged higher Wednesday as investors remained focused on Greece.
World markets: European stocks closed with modest gains. Britain's FTSE 100 ( ) added 0.3%, the DAX ( ) in Germany gained 0.6% and France's CAC 40 ( ) rose 0.4%.
The European Central Bank left its benchmark interest rate at 1%.
Meanwhile, the Bank of England also left rates unchanged, but said it would buy another £50 billion, about $79 billion, of UK government bonds to help stimulate the British economy.
Asian markets ended mixed. The Shanghai Composite () rose 0.1%, while the Hang Seng ( ) in Hong Kong lost a bit of ground and Japan's Nikkei ( ) shed 0.2%.
China's inflation rate rose in January, which may dash hopes that the country's central bank will soon take more action to support economic growth there. Consumer prices rose 4.5% year over year, China's National Bureau of Statistics reported Thursday.
Companies: Bank stocks were trading mixed Thursday after five of the nation's largest banks -- including Bank of America ( , Fortune 500), JPMorgan Chase ( , Fortune 500), Wells Fargo ( , Fortune 500), Citigroup ( , Fortune 500) and Ally Financial -- agreed to a $26 billion mortgage settlement.
Yahoo's (Fortune 500) stock rose following news reports that Chinese conglomerate Alibaba wants to buy back the 40% stake that Yahoo owns in the company. Shares of Hong Kong-listed Alibaba were suspended Thursday.,
Shares of Diamond Foods (Diamond Foods also put two top executives -- CEO Michael Mendes and CFO Steven Neil -- on administrative leave.) plunged almost 40% after the snack foods company said it will restate two years worth of financial results, after an auditing probe discovered that the company had improperly accounted for payments made to walnut growers.
Apple (Fortune 500) shares popped after All Things D said the company will unveil the iPad 3 next month.,
Corporate earnings also remained in the spotlight Thursday.
PepsiCo's (Fortune 500) fourth-quarter profit and revenue topped expectations, but shares fell as the company also announced 8,700 job cuts as part of a cost-cutting measure to increase investments in advertising and marketing.,
Shares of daily deals site Groupon (posted a surprise loss for its first quarter as a public company.) tumbled Thursday, a day after the firm
Cisco's (Fortune 500) stock edged up after the company beat expectations with its fourth-quarter profit and revenue. The tech giant also boosted its quarterly dividend by 30%.,
Economy: Initial unemployment claims fell by 15,000 to 358,000 during the latest week, a level near the four-year low hit in January. Economists expected 370,000 claims, compared to the previous week's 373,000.
Meanwhile, slightly more than 3.5 million Americans filed continuing claims, an increase by 64,000, in the week ended Jan. 28. Economists were expecting 3.47 million continuing claims.
Wholesale inventories rose 1% in December, topping expectations for a 0.4% increase.
Oil for March delivery increased $1.13 to end at $99.84 a barrel.
Gold futures for April delivery added $9.90 to settle at $1,741.20 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 2.05% from 1.98% late Wednesday.
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