A drop in unemployment claims and a rise in home sales pulled the stock market higher in light trading ahead of Thanksgiving.

Modest gains Wednesday left the Dow Jones industrial average and the Standard & Poor's 500 index at 13-month highs.

The economic news, as well as a drop in the dollar, stoked investors' appetite for higher-returning but riskier investments like stocks. For months, investors have been weighing their desire for bigger returns with fears that the stock market will falter if the economy looks like it won't maintain a recovery.

Investors drew confidence from a handful of promising economic reports. The government said new claims for unemployment insurance fell by 35,000 last week to 466,000. That's the fewest since September last year, and better than the 500,000 that economists had expected.

The drop in claims suggests the job market is healing, but concern remains that the improvement will be temporary. The jobless rate hit 10.2% in October and many analysts believe it will keep rising before starting to improve next summer.

In other economic reports, new home sales rose 6.2% to an annual rate of 430,000. That's above what economists surveyed by Thomson Reuters had expected.

The government also said consumer spending rose a brisk 0.7% last month, after falling in September. It was the best showing since August, when the government's now-defunct Cash for Clunkers programs enticed people to buy cars. The report was a welcome sign as the holiday shopping season goes into full swing.

Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, N.J., said investors are still worried about the sustainability of a recovery but are afraid of missing more of the market's eight-month rally.

"People may not believe in this market but they're reluctantly being pulled into it with each of these reports," he said.