• Dodd Departure: Senator's resignation could prompt bank changes.
• Jobless Claims: Numbers stay steady on new unemployment filings.
• Retail Resurgent: Macy's, Limited Brands, American Eagle report sales rise.
• China Slide: Shanghai shares drop after central bank tightens money market liquidity.

The Lowdown

Stocks closed up to flat Thursday after the Labor Department reported a rise in weekly jobless claims, although the increase was smaller than expected.

The Dow Jones Industrial Average finished up 33 at 10607. The S&P 500 was up 5 at 1142 and the Nasdaq ended flat, down a point at an even 2300.

In Thursday's weekly report, the Labor Department said initial claims for jobless benefits rose 1,000 to 434,000 in the week ended Jan. 2. That was better than Wall Street expectations for an 8,000 gain. The four-week average of new claims, which aims to smooth volatility in the data, fell for the 18th week in a row.

The report comes a day before the government will release its December nonfarm payrolls report, following the loss of just 11,000 nonfarm payrolls in November. Economists surveyed by Dow Jones Newswires expect payrolls to have declined another 10,000 last month, with the unemployment rate ticking back up to 10.1%, but some market participants anticipate the report to actually show some job creation.

In other markets Thursday morning, the dollar was higher, while Treasurys edged lower.

Shares fell in China after China's central bank unexpectedly raised a key interbank market interest rate Thursday for the first time in nearly five months, signaling a change in its policy focus toward pre-empting inflation risks in the new year. The tightening move, in the form of a higher yield in its weekly bill sale, came less than a day after the People's Bank of China hinted its priorities had shifted toward managing inflation expectations and away from single-mindedly supporting economic growth.

As of 4:06 p.m., crude oil futures traded on the Nymex were down 55 cents to $82.63.

Corporate News

• Retailers Limited Brands (LTD), Macy's (M). and American Eagle Outfitters (AEO) all reported better than expected December sales, ahead of Wall Street forecasts. Analysts expected some retailers to increase their forecasts for the fiscal fourth quarter; the three chains said promotions during the holiday season were more limited and inventory planning more rational than the panicked discount pricing of last year. As a result, better earnings were expected even if traffic and purchases remained sluggish. STORY
• Costco (COST) and Children's Place (TCBG) both delivered better-than-expected same-store sales, while Hot Topic (HOTT) missed.

The Economy

• The Labor Department reported that the number of U.S. workers filing new claims for jobless benefits edged up just 1,000 to 434,000 last week, supporting expectations that the job market is bottoming out. STORY
• Connecticut Democratic Senator Christopher Dodd, chairman of the Senate Banking Committee, said he woudl not seek a sixth term. That clouds the picture for financial regulatory overhaul. STORY

Dow Jones Newswires contributed to this report.