Dow Jones Industrial Average Gains After European Central Bank Keeps Interest Rates Unchanged

This story was updated at 4 p.m. EDT

U.S. stocks closed mildly higher Thursday, with the Dow Jones Industrial Average paring gains in the afternoon to finish roughly 20 points higher after rising as much as 186 points in morning trading. The blue-chip Dow and Standard & Poor's 500 received a boost after the European Central Bank (ECB) kept benchmark interest rates unchanged, hovering at historic lows.

Economists are looking ahead to Friday’s highly anticipated employment report. The U.S. unemployment rate is forecast to tick down to 5.2 percent in August from the 5.3 percent in July. Economists forecast nonfarm payrolls likely increased by 220,000 last month after rising 215,000 in July, according to a analysts polled by Reuters.

The Dow Jones Industrial Average (INDEXDJX:.DJI) gained 23.38 points, or 0.14 percent, to close at 16,374.76. The Standard & Poor's 500 index (INDEXSP:.INX) rose 2.27 points, or 0.12 percent, to finish at 1,951.13. However, the Nasdaq composite (INDEXNASDAQ:.IXIC) fell 16.48 points, or 0.35 percent, to end at 4,733.50.

Nine of the 10 S&P 500 sectors traded higher, led by a nearly 1 percent gain in consumer staples stocks. Energy shares gave up the majority of gains in afternoon trading, adding 0.5 percent after jumping more than 2 percent following the opening bell.

Meanwhile, oil prices lost steam, but still closed slightly higher Thursday after briefly adding more than 4 percent in morning trading. West Texas Intermediate crude, the benchmark for U.S. oil prices, rose 1 percent to $46.75 per barrel for October delivery on the New York Mercantile Exchange. On the London ICE Futures Exchange, Brent crude, the global benchmark for oil prices, dipped 0.02 percent to $50.49.

The gains in U.S. equities Thursday came after the ECB downgraded its inflation forecast, leaving the door open to extend and expand its bond-buying program beyond 2016.

“We will fully implement our monthly asset purchases of 60 billion euros,” ECB President Mario Draghi said during a press conference. “They are intended to run until the end of September 2016 or beyond, if necessary, and, in any case, until we see a sustained adjustment in the path of inflation that is consistent with our aim of achieving inflation rates below but close to 2 percent over the medium term."

Following the press conference, the euro fell around 1 percent against the U.S. dollar. European stocks across the board traded higher, with the Euro Stoxx 600 index up by 2 percent. Japan's benchmark Nikkei 225 index snapped a four-day losing streak, edging up 0.5 percent.

The number of Americans filing new applications for unemployment benefits rose more than expected last week, as initial claims for state unemployment benefits increased 12,000 to a seasonally adjusted 282,000 for the week ended Aug. 29, the Labor Department said Thursday. Economists had forecast claims rising to 275,000 last week.

However, economists say the underlying trend remained consistent with a strengthening labor market. The last time claims have been this low for a half-year was in 1973, when the labor force was much smaller.

“Firms are laying off few workers, and those who do lose their jobs are finding new work quickly,” Gus Faucher, senior macro economist at PNC Financial Services Group, said in a research note.

Separately, the U.S. services sector continued to grow in August, but eased from a previous ten-year high hit in July. Even so, economic activity in the non-manufacturing sector grew in August for the 67th consecutive month, an industry report showed on Thursday.

The Institute for Supply Management said its services index fell to 59 in August from 60.3 in July, which was its highest since August 2005. The reading still came in above analysts expectations for a reading of 58.1 last month, according to a Reuters survey. A reading above 50 indicates expansion in the sector.

Meanwhile, the U.S trade deficit narrowed 7.5 percent to $41.9 billion in July following a revised surge to $45.2 billion in June, the Commerce Department said Thursday. A decline in imports was the main driver of the narrower trade deficit in July. However, exports showed some signs of life as they recorded their first monthly gain since April while imports declined, increasing 0.4 percent, or $0.8 billion.

U.S. stocks closed sharply higher Wednesday, with the Dow Jones Industrial Average soaring nearly 300 points, rebounding a day after Wall Street recorded its worst start to September in 13 years.