By Anora Mahmudova and Sara Sjolin, MarketWatch

Energy shares rally, but jump in yields hits defensive stocks

U.S. stocks-market indexes tepidly inched higher on Thursday, following upbeat manufacturing data and rising oil prices.

The gains were modest, however, as investors grappled with rising interest rates, that hit defensive sectors such as utilities.

Oil futures continued to climb, trading above $50 a barrel following a deal reached by the OPEC producers to cut production a day earlier.

Data releases were mixed but pointed to a continued growth in the labor market and manufacturing.

Specifically, the ISM manufacturing index rose to 53.2% in November from 51.9% in October. A reading above 50 indicates expansion. Meanwhile, Markit's November final PMI index was at 54.1 compared with 53.4 in October.

The S&P 500 index was wavering, trading mostly flat at 2,199 as big gains in the energy and financials sectors were offset by losses in utilities and consumer staples. So-called defensive sectors took a hit as interest rates, measured by the yield on the 10-year Treasury climbed to 2.45%, a 17-month high.

The Dow Jones Industrial Average was up by 57 points, or 0.3%, to 19,180, trading above its previous closing high. The Nasdaq Composite Index was off by 4 points, or 0.1%, to 5,319.

Equity moves come ahead of a much-anticipated jobs report due Friday.

Healthy jobless claims on Thursday and a strong ADP private-sector employment report on Wednesday suggest that the upbeat trend in the labor market remains intact.

The number of Americans applying for unemployment benefits (http://www.marketwatch.com/story/jobless-claims-rise-17000-to-268000-2016-12-01)over the week ended Nov. 26 jumped 17,000 to 268,000. The layoff level is still close to multidecade lows, however. ADP data showed 216,000 jobs were added last month.

The main indexes hovered near their record levels set last week, following the best monthly gains since this summer.

Trading to wrap up the end of November, which saw all the main indexes touch records, was choppy on Wednesday (http://www.marketwatch.com/story/us-stocks-set-to-step-higher-as-opec-optimism-grows-2016-11-30), when stocks opened with firm gains after news the Organization of the Petroleum Exporting Countries agreed to cut output for the first time in eight years.

OPEC's deal continued to support gains for oil prices Thursday (http://www.marketwatch.com/story/oil-prices-keep-climbing-after-opec-deal-brent-shoots-above-52-a-barrel-2016-12-01), with West Texas Intermediate oil futures trading 2.6% higher at $50.66 a barrel. The futures soared more than 9% on Wednesday. (http://www.marketwatch.com/story/oil-prices-rebound-but-many-doubtful-opec-can-get-a-deal-done-2016-11-30)

Read: These oil stocks are soaring after OPEC's cut--and more gains are on the way (http://www.marketwatch.com/story/these-us-oil-stocks-are-soaring-after-opecs-cut-and-more-gains-are-on-the-way-2016-11-30)

The Energy Select Sector SPDR ETF (XLE), the most popular way for investors to play the energy space, rose 1% on top of 5.1% gain on Wednesday, its biggest one-day move since November 2011.

"Given the [drastic] change we've now seen in oil prices, this has the potential to deliver a meaningful impact to manufacturing costs, inflation and may also prove unsettling for consumers as North America moves into the depths of winter," said Jamieson Blake, retail sales manager at ADS Securities London, in a note.

Earlier Thursday, official manufacturing purchasing managers index out of China came in better than expected (http://www.marketwatch.com/story/stimulus-and-property-sales-keep-china-growing-2016-12-01), rising to 51.7 in November from 51.2 in October.

Read:This is what investors say is the biggest risk for 2017 (http://www.marketwatch.com/story/this-is-what-investors-say-is-the-biggest-risk-for-2017-2016-11-30)

In addition to economic reports, monthly auto sales will trickle out throughout Thursday trading.

See:

Movers and shakers: General Motors Co.(GM) shares surged 3% to the highest level since Dec. 10, 2015, after the auto maker said November U.S. vehicle sales jumped 8% from a year ago, with all four brands showing growth.

Shares of Guess Inc.(GES) slumped 16% after the fashion retailer late Wednesday cuts its earnings outlook for the year (http://www.marketwatch.com/story/guess-cuts-outlook-posts-disappointing-results-2016-11-30-17485106).

Express Inc. (EXPR)dropped 5.1% after the apparel and accessories retailer beat fiscal third-quarter expectations but provided a downbeat outlook for the current quarter (http://www.marketwatch.com/story/expresss-stock-plunges-after-profit-and-sales-outlook-were-well-below-expectations-2016-12-01).

Kroger Co.(KR) shares fell 3.4% after the grocer provided weak fiscal 2017 guidance.

Dollar General Corp.(DG) fell 7.3% following weaker-than-expected third-quarter results.

FuelCell Energy Inc. (FCEL) shed 6.7% after the struggling fuel cell power plant company said it cut 96 jobs, or 17% of its workforce, in an effort to cut to costs and production amid falling sales.

Other markets: Asian markets closed firmly higher (http://www.marketwatch.com/story/asia-stocks-higher-with-nikkei-headed-for-best-close-of-2016-2016-12-01), lifted by optimism over the OPEC output deal. Japan's Nikkei 225 index logged its best finish of 2016.

European stocks were mainlylower (http://www.marketwatch.com/story/european-stocks-in-the-red-as-consumer-goods-shares-fall-but-oil-shares-rise-2016-12-01).

The dollar declined against most other major currencies, with the ICE Dollar Index down 0.2% at 101.31. 10-year Treasury yield rose 5 basis points to 2.44%, its highest in 17 months. Gold fell $1.8 to $1,172 an ounce.

-- Barbara Kollmeyer in Madrid and Carla Mozee in London contributed to this article.

(END) Dow Jones Newswires

December 01, 2016 10:28 ET (15:28 GMT)

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