By Sarina Penn (TheStreet.com)

Stocks in the U.S. were off their peak for the session Thursday afternoon as crude-oil prices stormed higher, but the major indices nevertheless continued to trade well in positive territory amid otherwise good news from various slices of the corporate world.

The Dow Jones Industrial Average jumped 109 points, or 0.9%, to 12,500, with especially strong support from Verizon (VZ) and Wal-Mart (WMT). The S&P 500 advanced 14 points at 1396, and the Nasdaq Composite gained 25 points to 2528, as both indices moved up roughly 1%.

Still, said Fred Dickson, senior vice president and market strategist with D.A. Davidson, "Really, we still don't see a lot of conviction at this point. It's been a yin-and-yang sort of market. The big-money investors are sitting on the sidelines, slowly nibbling away on the buy side, and then we see short-term profit-taking."

"Our guess is that the underlying trend is up," he continued, "but this is a period of low market conviction and high volatility, and it'll probably stay that way at least until the second-quarter earnings season, or the next [Federal Reserve] meeting."

The Fed is next scheduled to convene June 24 and 25.

Meanwhile, Bruce Zaro, chief technical strategist with Delta Global Advisors, is looking ahead to second-quarter numbers on U.S. gross domestic product, which he believes will be more important than first-quarter data. "It will either confirm that there is light at the end of the tunnel, and that the economy is beginning to crawl back, or refute that theory."

"I think what investors are looking for is just some evidence that the economy is possibly moving forward, or at the very least not going into an extended or an accelerated downturn," Zaro said. "They're looking for some thread to say that consumers are hanging in there."

That, said Peter Morici, a business professor with the University of Maryland and former director of economics at the U.S. International Trade Commission, is precisely what makes tomorrow's jobs report so monumentally important. "Job losses," he wrote in a Forbes column today, "are pushing down household disposable income and consumer spending, and that might send second-quarter GDP growth into negative territory."

"If payroll jobs decline for a fifth straight month in May," he warned, "it will be hard to deny that the economy is in a modern recession, a period of malaise and protracted angst -- lethargic growth interrupted by periods of contraction -- of difficult-to-predict duration."

Crude oil let some of the air out of equities Thursday as futures rocketed $5.22 to $127.52 a barrel, intensifying what were already fairly strong gains earlier in the day. Also, gas at the pump is now only a penny away from the $4 mark, with the national average reaching a new record of $3.989 a gallon.

Gold futures dropped $8.30 to $875.50 an ounce. The U.S. dollar weakened by 0.9% against the euro at $1.5592, but climbed by 0.6% against the yen to fetch 105.62.

On the corporate front, Verizon more than recovered from a loss in the prior session after confirming it will buy Alltel for $28.1 billion via its Verizon Wireless joint venture with Vodafone (VOD), a pact that will make it the largest U.S. mobile carrier. The deal, news of which broke yesterday, comes just months after Alltel was taken private by TPG Capital and Goldman Sachs (GS). Verizon shares were up 4.3% at $38.56.

Retailers were also in focus, with many of the nation's chain stores reporting better-than-expected monthly results. Wal-Mart, the world's biggest store operator, said same-store sales -- those at locations open a year or longer -- climbed 3.9% in May, excluding fuel sales, and its shares were up 2.2%. Total sales advanced 9.8% to $31.04 billion. Wal-Mart stock was tacking on 3.2% to $59.50.

TJX (TJX), which operates the T.J. Maxx and Homegoods chains, said comps were up 2% in May. That figure jumped 9% at Costco (COST) last month, as well. TJX shares added 2.1%, and Costco rose 3.1%.

"It's hard to extrapolate how much of that is due to the Bush administration's helicopter checks," said Dickson, "but some of it is obviously making its way through."

The government's tax-rebate checks, aimed at rousing the sluggish U.S. economy, began shipping out in last month.

"The administration is certainly putting a lot of hope in that," said Zaro. "It doesn't really amount to a lot, relative to the GDP, but I think those little bits and pieces, if you will, are important for the psychology of the market."

Meanwhile, Target (TGT) said last month's comparable sales eased 0.7%, and Gap GPS reported a 14% drop, and shares of both were edging down lately following a bit of strength earlier. Limited (LTD) saw mixed trading on word of a 6% comps decline. Lately, shares lost 1.5%.

Over in the financial space, Deutsche Bank's Mike Mayo recommended buying Lehman Brothers (LEH) stock, saying that "worst-case scenarios" are already baked into the price. A Bernstein analyst kept his market perform rating on the stock.

Those moves came a day after Merrill Lynch upgraded Lehman to a positive ranking, and all three analysts have said that Lehman won't fall apart in the same manner that Bear Stearns, now part of JPMorgan Chase (JPM), did three months ago.

Lehman's cash problems led to speculation of a collapse almost immediately following the Bear debacle in March, and earlier this week the stock took a beating on rumors that the brokerage continues to struggle mightily. Recently, however, shares were bouncing 5.5% at $33.12.

In other positive analyst research, United Airlines operator UAL (UAUA) was upgraded by both Lehman and Soleil a day after announcing it will cut down its fleet and lay off about 1,000 more workers by year-end than it had originally planned on doing. Big early gains were tapering off recently, but the stock was still up 6.5%.

Spiking fuel costs and a generally difficult macroeconomic environment have forced several airlines to make similar moves, among them Continental Airlines (CAL), which today said it will cut domestic mainline departures by 16% starting in the September and plans to lay off 3,000 employees. Further, CEO Larry Kellner and president Jeff Smisek said they would cut their salaries for the rest of the year and forego benefits from their 2008 incentive program.

Continental shares moved up 3%, and Northwest Airlines (NWA) jumped 9.8% on a Lehman upgrade. Yesterday the carrier announced that its traffic had picked up by 4.3% in May.

Also helping keep the mood cheery was the Labor Department, which said that the number of people filing for unemployment benefits slid to 357,000 last week, down by 18,000 from the prior week's upwardly revised figure. Economists were expecting 372,000 claims, on average.

Back in analyst calls, Royal Bank of Scotland (RBS) was lifted to buy from hold at Citigroup, and teen apparel retailer Hot Topic (HOTT) was upped to outperform at Friedman Billings. RBS shares were up 3.8% on the NYSE, and Hot Topic soared 15.8%.

On the other hand, Cowen & Co. downgraded Acrobat software maker Adobe Systems (ADBE) to neutral from outperform, pushing the stock down 1.3%. UBS slapped a sell sticker on bulldozer maker Caterpillar (CAT), and Motorola (MOT) was cut to underperform at Oppenheimer. Caterpillar and Motorola were each losing ground lately.

Treasury prices were sinking. The 10-year note shed 9/32 in price to yield 4.02%, and the 30-year bond was off 12/32 in price, yielding 4.72%.

Foreign markets were mixed. The Hang Seng Index in Hong Kong tacked on 0.6%, but the Nikkei 225 in Tokyo gave up 0.7% overnight, but In Europe, London's FTSE 100 added 0.4% as Germany's Xetra Dax lost 0.3%, and the Paris Cac was down 0.2%.