Wall Street rises as valuations lure bargain-hunters

NEW YORK (Reuters) - Stocks rose on Thursday, as relatively cheap valuations tempted investors back to Wall Street after a three-day losing streak that had pushed Nasdaq into an official bear market.

Gains in shares of retailers and financial companies, two sectors that have suffered the most from the housing crisis and recession fears, helped the market rebound. Among the biggest gainers were department store chain Sears Holdings Corp (SHLD.O) and bank JPMorgan Chase & Co (JPM.N).

Trading was volatile, with indexes gyrating between positive and negative territory repeatedly. Wall Street opened lower on troubling jobless claims data and as a weak outlook from Cisco Systems (CSCO.O), a technology bellwether, added to fears of a looming recession.

But falling share prices and merger and acquisitions talk drew buyers, helping the Nasdaq, Dow and S&P all gain more than 1 percent at one point in the session.

"The economic numbers indicate we're seeing a slower economy," but current valuation on the S&P 500 is well below historic norms, offering "real value" to bargain-hungry investors, said Anthony Conroy, head trader for BNY ConvergEx, an affiliate of the Bank of New York in New York,

The Dow Jones industrial average (.DJI) was up 46.90 points, or 0.38 percent, at 12,247.00. The Standard & Poor's 500 Index (.SPX) was up 10.46 points, or 0.79 percent, at 1,336.91. The Nasdaq Composite Index (.IXIC) was up 14.28 points, or 0.63 percent, at 2,293.03.

Cisco shares rose 1.3 percent to $23.38, after earlier falling to a more than one-year low of $21.77 after the network equipment maker gave a weak outlook and warned of a rapid slowdown in U.S. and European orders.

Wal-Mart Stores (WMT.N) and Target Corp (TGT.N) were among a slew of retailers reporting disappointing January sales, but the shares of both big-box chains rose.

Wal-Mart shares rose 2.1 percent to $49.84 and Target stock climbed 6.1 percent to $54.10. Sears shares gained 5.1 percent to $102.68.

Shares of Children's Place Retail Stores Inc (PLCE.O) shot higher after the former chief executive of the kids apparel chain said he was confident he could make a bid to buy the company.

Children's Place shares were up nearly 20 percent to $21.28.

The airline sector also buzzed with merger-and-acquisition talk. The Wall Street Journal reported a merger of Delta (DAL.N) and Northwest (NWA.N) could be announced as early as next week. In addition, preliminary talks between United Airlines' parent, UAL Corp (UAUA.O), and Continental (CAL.N) have grown more serious, a source familiar with the matter said.

Delta rose 3 percent to $18.49 and UAL was up 5 percent to $39.55. Continental gained 5.8 percent to $30.45 while Northwest rose 0.2 percent to $18.50.