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The Dow industrials' top percentage gainers were Coca-Cola Co (KO.N), up 1.5 percent, Kraft Foods Inc (KFT.N), up 1.7 percent and Merck & Co (MRK.N), up 1.2 percent.

Energy shares also rallied as U.S. crude oil futures gained more than 1 percent to trade above $108 a barrel.

The S&P 500 fell almost 1 percent early but found support near 1,300, a level that attracted buying interest in early March. Failing to hold that level could trigger a test of the benchmark's 2011 low near 1,257.

Stocks have sagged lately as economists have lowered forecasts for U.S. growth. A Reuters poll of economists showed 2011 gross domestic product forecasts fell to 2.9 percent from 3.1 percent.

"GDP forecasts are continuing to fall, so (bets on defensives) are a safety trade," said Peter Boockvar, equity strategist at Miller Tabak & Co in New York.

Adding to the bearish sentiment, Google Inc (GOOG.O) shares fell 5 percent to below $550 in extended trading after the company's first-quarter profit fell short of Wall Street's target as operating expenses surged.

The Dow Jones industrial average .DJI rose 14.16 points, or 0.12 percent, to end at 12,285.15. The Standard & Poor's 500 .SPX gained 0.11 of a point, or 0.01 percent, to 1,314.52. The Nasdaq Composite .IXIC dropped 1.30 points, or 0.05 percent, to 2,760.22.

GOLDMAN FALLS, EL PASO GAINS

A Senate investigation of Goldman Sachs (GS.N) hurt the Wall Street giant and some of its peers, while an unexpected rise in jobless claims added to bearish sentiment that kept gains in check.

Goldman shares fell 2.7 percent to $155.79 and were a drag on the S&P financial sector index .GSPF, which was down 0.9 percent.

Further weighing on financials, major housing lenders agreed late on Wednesday to costly fixes of their foreclosure practices as part of a settlement with U.S. bank regulators that jumped ahead of a states' probe.

The KBW Banks Index .BKX dropped 1.1 percent.

Adding to the boost from the energy sector as oil prices rose, natural gas producer and pipeline company El Paso Corp (EP.N) said it will develop a shale oil field without a partner. El Paso shares jumped 5.5 percent to $18.26 to lead gains in the S&P energy sector index.GSPE, which rose 0.6 percent.

"Oil closed above $108 so all the energy stocks rallied this afternoon," Boockvar said.

Shares of Google slid more than 5 percent as investors zeroed in on the rise in expenses to $2.84 billion. This dwarfed a 29 percent jump in net revenue and reflected a record hiring spree, company-wide salary raises, and splurging on everything from marketing to technology.

Analysts expect co-founder and new Chief Executive Larry Page to keep spending on new products to spearhead an aggressive push into areas such as social networking and mobile businesses. Google executives said on Thursday the dramatically stepped-up spending was part of the company's plan to chase multibillion business opportunities.

Page, 38, a media-averse technology visionary who took over as CEO this month from decade-long veteran Eric Schmidt, came on a conference call with analysts for just a few minutes, disappointing some eager to hear his plans to jump-start growth and innovation.

Page expressed his optimism in his company's future, then departed, leaving a trail of questions that analysts directed at the other executives.

"My sincere hope is that over time he (Page) enunciates the strategy much more clearly," said Jim Tierney, chief investment officer of asset manager WP Stewart, which owns Google shares.

Page is expected to bolster innovation and cut bureaucracy as Google battles social networking leader Facebook and Apple Inc. But his brief remarks on Thursday's call did little to reassure Wall Street about the management change.

"You got expenses growing faster than revenue and some people were caught by surprise by the willingness of the company to spend," said BGC Partners analyst Colin Gillis.

"But Larry Page has signaled pretty clearly that he is going to be driving up expenses. If the expenses are targeted and result in future revenue streams, then good for Larry. If not, that results in an undisciplined spending approach."

Google plans to hire more than 6,000 people this year, after taking a record 2,000 on board in the quarter and raising salaries by about 10 percent across the board on January 1.

"The discipline of the company has not changed; we're just really bullish on our prospects," Chief Financial Officer Patrick Pichette told analysts. "I can tell you every element of the company (expenses from real estate to food) is scrubbed and scrutinized."

WHAT'RE YOUR INTENTIONS?

The focus on Google's spending overshadowed strong first quarter net revenue growth of 29 percent year-over-year to $6.54 billion, above the $6.32 billion expected by analysts.

For a company of Google's size "that's fairly magnificent," said WP Stewart's Tierney. "There are not a whole lot of companies in any segment that can do that."

Google said drivers of its topline growth included an 18 percent jump in the paid clicks on its search ads, bolstered by new types of retail ads featuring product images, as well as momentum in mobile ads and video ads on its YouTube website.

The Labor Department said on Thursday its seasonally adjusted index for prices paid at the farm and factory gate -- excluding volatile food and energy costs -- rose 0.3 percent after gaining 0.2 percent in February. Economists had expected core PPI to rise 0.2 percent in March.

Light trucks prices, which advanced 0.7 percent, accounted for a third of the rise in core PPI last month. The increase in light truck prices was the biggest since July. Passenger vehicle prices increased 0.9 percent, the largest increase since June 2009.

"It looks like the disruption to global autos production stemming from the Japanese disaster will hit autos supply and, consequently could lead to some further steep price increases over the next few months," said Paul Ashworth, chief U.S. economist at Capital economics in Toronto.

In the 12 months to March, the core producer price index rose 1.9 percent, the biggest increase since August 2009, after gaining 1.8 percent in February. March's increase was in line with market expectations.

The increase in headline PPI, however, slowed to 0.7 percent after surging 1.6 percent in February.

Economists polled by Reuters had expected PPI to rise 1 percent last month. In the 12 months to March, producer prices increased 5.8 percent, the largest gain in a year, after rising 5.6 percent in February.

Although rising gasoline prices are exerting upward pressure on inflation at the production level, the Federal Reserve largely views this as transitory. Officials have, however, said they would act if necessary to ensure that an inflation psychology does not take root.

FED WORRIES ABOUT COMMODITY PRICES

The U.S. central bank said in its Beige Book summary of economic conditions on Wednesday that businesses were reporting that higher commodity costs were putting upward pressure on prices.

But with the labor market still weak and wage growth subdued, producers have limited capacity to pass on the higher costs to consumers.

A second report from the Labor Department showed initial claims for state unemployment benefits rose 27,000 to a seasonally adjusted 412,000, well above economists' expectations for a fall to 380,000.

The four-week moving average of unemployment claims -- a better measure of underlying trends - climbed 5,500 to 395,750.

The rise in claims interrupted a downward trend that had kept them below the 400,000 threshold for four weeks. That level is normally associated with steady job growth. Despite last week's rise, the four-week average held below the 400,000 mark for a seventh straight week.

S&P index futures extended losses on the claims data, while U.S. government debt prices extended gains.

Energy prices, which rose 2.6 percent, accounted for nearly 90 percent of the increase in wholesale prices last month. Energy prices rose 3.3 percent in February.

Gasoline prices rose 5.7 percent after increasing 3.7 percent in February. Food prices fell 0.2 percent, the first decline since August.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

* Risk appetite retreated on growing fears of monetary tightening in China after a media report suggested the country's inflation figures will be higher than expected in March.

* Some caution was also expected to prevail ahead of upcoming corporate results, with the spotlight likely to be on the possible impact of rising raw material costs on margins and the effect of supply chain disruptions arising from the earthquake in Japan.

* Google (GOOG.O) is scheduled to release results after markets close on Thursday, with analysts expecting to see a 25 percent year-on-year increase in net revenue to $6.32 billion and earnings per share of $8.10, up from $6.76 a year earlier.

* The impact of rising commodity prices will also be in focus at the release of the producer price index figures for March at 1230 GMT. Year-on-year producer prices is forecast to rise to 6.2 percent from 5.6 percent.

* Other data scheduled for release include weekly jobless claims numbers, also due at 1230 GMT.

* U.S. stocks finished mostly flat in a choppy session on Wednesday, as investors bet on strong technology earnings even as JPMorgan Chase's numbers weighed on other market sectors.

* In company news, Italian car maker Fiat (FIA.MI) wants to hike its stake in Chrysler to 46 percent by June, as soon as the U.S. group manages to repay $7 billion of government debt, an Italian daily said.

* Suppliers to Apple Inc (AAPL.O) have begun production of white iPhones after a delay of almost 10 months, pointing to a launch date of within a month, two people familiar with the situation said on Thursday.

* BP (BP.N) and Russia's Rosneft (ROSN.MM) have extended by a month the deadline to complete a $16 billion share swap hours before its expiry, giving BP more time to salvage a deal beset by problems from the start.

* U.S. regulators are probing whether some major banks colluded to manipulate a global benchmark interest rate before and during the financial crisis, the Wall Street Journal reported, citing people familiar with the situation.

* In a frenzy to protect its interests at the start of the credit crisis, Goldman Sachs Group Inc (GS.N) sold mortgage-linked derivatives to clients at inflated prices and misrepresented the nature of the deals, according to documents released by a Senate subcommittee.

* Commodities giant Glencore launched its long-awaited offering of up to $11 billion on Thursday, outlining plans for a May debut that will boost its firepower for acquisitions and make paper millionaires of its partners.

* Shares in Europe fell in early trade, with the pan-European FTSEurofirst 300 .FTEU3 index of top shares down 0.2 percent at 1,132.69 points.

(Reporting by Harpreet Bhal; Editing by Mike Nesbit)

World stocks were flat to lower despite a burst of corporate activity that would usually lift investors' spirits.

Glencore, the world's largest commodities trading company, plans to raise up to $12.1 billion in a London and Hong Kong stock market floatation that is London's biggest ever. Shares in Japan's Isuzu Motors jumped on a report that Volkswagen was considering buying all or part of it.

But European shares, as measured by the FTSEurofirst 300

were down a half a percent, partly out of concern that Chinese inflation is returning.

Hong Kong's Phoenix TV, citing an unnamed source, said China's annual rate of inflation in March was likely to be 5.3-5.4 percent, a 32-month high and just above an estimate in a Reuters poll.

Investors are particularly concerned about Chinese inflation in case government attempts to restrain it prompt a so-called hard landing for the economy.

"Inflation in emerging economies has become a serious issue, as the impact from high commodity prices is stronger for those countries," said Arnaud Scarpaci, fund manager at Paris-based Agilis Gestion.

Earlier, Nikkei benchmark closed up 0.1 percent, held back by continued worries about the impact of its earthquake, tsunami and nuclear disasters.

The Reuters Tankan survey of 400 large firms found on Thursday that power shortages caused by the crippled Fukushima nuclear plant had hit nearly 60 percent of local companies, disrupting production and supply chains.

WEAK DOLLAR

Wednesday's U.S. retail sales data and the Federal Reserve's Beige Book report did nothing to change the view the U.S. central bank would stick with its $600 billion asset buying program until June.

The European Central Bank, for example, has already raised interest rates and is expected to do so again, widening the premium for holding euros rather than dollars. Other economies are already much further on in raising rates.

The dollar index, which measures its strength against major currencies, fell around 0.4 percent, bringing its losses this year to around 5.5 percent.

The dollar fell as low as 83.20 yen, moving away from its 6-1/2 month high around 85.55 set last week. The euro was up 0.4 percent at $1.4496.

Details of the offering, outlined in a London intention-to-float and confirming an earlier Reuters story, did not include the long-awaited appointment of a new non-executive chairman for the group -- a requirement for its listing.

"It is an important decision, we are just working through the final process. We have chosen someone, so we should announce it shortly," Chief Executive Ivan Glasenberg said in a telephone interview with Reuters, declining to comment further.

Three candidates were on the shortlist days before the document was published, including former French Foreign Legionnaire Simon Murray and two others. The new chairman will sit on an eight-strong board alongside Glasenberg.

The much-anticipated float, which has generated a buzz akin to the 1999 float of Goldman Sachs, marks the end of four decades of closely guarded privacy for the world's largest commodities trading company.

The deal will also turn many of Glencore's executives into instant millionaires, although the firm has blocked senior management from selling shares for up to five years.

"All partners are invested for the long term. No one is taking money off the table," Glasenberg said.

Baar, Switzerland-based Glencore is seeking to capitalize on record-high prices for several commodities and surging demand for metals and other natural resources from fast-growing economies in China and India.

Glencore, controlled by some 500 partners, reported a 40 percent rise in 2010 net profit to $3.8 billion, while revenue climbed 36 percent to $145 billion. But slim margins at Glencore's mines and smelters have been a concern for some.

The narrow ratios contrast with better overall margins at its nearest listed rival, Noble Group (NOBG.SI).

STRONG DEMAND

"Glencore is a commodities trader and less vulnerable to commodity prices," said Helen Lau, an analyst at UOB Kay Hian. "The sheer size of trading volume in commodities will continue to rise globally. Investors probably will be very interested in the IPO, given the commodities prices are so high now."

Prices of copper and other commodities have traded at record-highs recently, with the Reuters-Jefferies CRB index .CRB, a global commodities benchmark, up more than 8 percent since the beginning of the year. The index has been trading near its strongest level since September 2008.

Sources previously told Reuters that Glencore's proposed IPO had received a positive response from potential investors when the firm's management travelled the world to gauge demand for the deal.

"It is very savvy for them to list in both London and Hong Kong. The appetite for commodity-related shares in Asia is well-known and remains robust," said Kirby Daley, a Hong Kong-based senior strategist of Newedge's prime brokerage unit, which provides services to hedge funds.