By Chris Dieterich 

U.S. stocks edged higher Thursday as investors weighed a weak report on economic growth against a strong one from the labor market. The Dow Jones Industrial Average climbed 13 points, or 0.1%, to 16646 in midmorning trading. The S&P 500 advanced three points, or 0.2%, to 1913 and the Nasdaq Composite Index added 12 points, or 0.3%, to 4237.

Major indexes traded in a narrow band in below-average volume after the second estimate of first-quarter U.S. gross domestic product showed the economy contracted at a seasonally adjusted 1%, more than expected. Investors largely brushed off the weak report, saying that it essentially told the market what is already known: the economy was sluggish in the first three months of 2014, in large part because of harsh winter weather.

Government economists had previously estimated that GDP, the broadest measure of goods and services produced across the U.S., slowed to a 0.1% growth rate in the first quarter. The latest GDP report does little to change the monetary-policy trajectory of the Federal Reserve, which is reducing its bond purchases but remains committed to keeping interest rates low for an extended period, according to Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management, which manages about $242 billion.

"People are dismissing some of the weakness and expecting that there is going to be strength in the future," Mr. Jacobsen said. "It's not about what was; it's about what will happen. A lot of what will happen will be driven by central bank policies."

Mr. Jacobsen has been recommending that investors buy more shares of large U.S. companies, while reducing their holdings of shares of smaller ones. The Russell 2000 index of small-cap stocks, which recently had fallen more than 10% from its March high, declined 0.1% on Thursday.

Anastasia Amoroso, global market strategist at J.P. Morgan Funds, which oversees about $400 billion, was similarly unmoved by the weak economic reading, which she likened to "looking in the rearview mirror."

Rather, she is focused on more recent economic data that has shown signs of improvement as stocks grind higher.

Jobless claims in the week ended May 24 fell more than expected and remained near prerecession levels, according to the Labor Department. The number of Americans filing claims for new jobless benefits fell by 27,000 to a seasonally adjusted 300,000, versus an expected to decline to 319,000.

"The trend is starting to reverse and, all in all, the data is adding up to a stronger second quarter," Ms. Amoroso said.

A separate report on pending home sales for April rose 0.4%, below expectations for a gain of 2%.

The yield on the 10-year Treasury note rose to 2.417% from 2.440% late Wednesday.

European markets were little changed, with the Stoxx Europe 600 flat. Traders positioned for next week's European Central Bank monetary-policy decision. The central bank is widely anticipated to announce new stimulus measures on June 5.

Asian markets were little changed. Japan's Nikkei Stock Average rose 0.1%, while China's Shanghai Composite eased 0.5%.

Crude-oil futures added 0.4% to $103.10 a barrel, while gold futures lost 0.4% to $1,254.80 a troy ounce.

The dollar fell against the euro and the yen.

In U.S. corporate news, Apple rose 1% after it confirmed late Wednesday that it would buy headphone and audio software company Beats Electronics and subscription streaming music service Beats Music for a combined $3 billion.

Costco Wholesale added 0.5% after the bulk retailer said its quarterly profit rose 3% from a year earlier, but missed expectations.

Tyson Foods rose 5.9% after entering the bidding for Hillshire Brands, which jumped 16%. Tyson offered to buy the maker of Jimmy Dean sausage and Ball Park hot dogs for about $6.1 billion. The fresh bid comes just two days after Pilgrim's Pride, down 1.5%, revealed an unsolicited offer for Hillshire worth about $5.5 billion. Earlier this month, Hillshire moved forward with a $4.6 billion deal to acquire Pinnacle Foods , which declined 0.1%.

Abercrombie & Fitch rose 4% after the teen retailer's quarterly loss widened, though not as much as expected.

Palo Alto Networks rose 7% after the cybersecurity company late on Wednesday said its quarterly profit and revenue topped estimates. The company also announced it had settled litigation with Juniper Networks Inc. over a patent dispute.

Sanderson Farms added 3% after the meat processor's quarterly profit more than doubled, topping estimates, in part because feed costs declined from a year earlier.

Intercept Pharmaceuticals rose 3.8% after the U.S. Food and Drug Administration granted fast-track status to its lead product candidate for hard-to-treat cases of an autoimmune liver disease.

Tilly's tumbled 17% after the teen retailer late Wednesday posted weaker sales and higher expenses in its most recent quarter.

Write to Chris Dieterich at chris.dieterich@wsj.com

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