Energy helps Wall Street inch higher

NEW YORK (Reuters) - Stocks edged higher on Thursday as shares of Exxon Mobil (XOM.N) and other energy companies rose on supply concerns, offsetting worries about the economy and a pullback in bank stocks.

Trading was volatile after a two-day surge as investors wrestled with conflicting economic reports, disappointing retail profit reports and news of a pipeline explosion in the U.S. Midwest.

Shares of Exxon rose nearly 1 percent as an explosion at a pipeline disrupted the flow of oil from Canada to U.S. Midwest refineries.

Caution before a speech by Federal Reserve Chairman Ben Bernanke on Thursday evening also kept a lid on the market and some investors opted to sell some of the winners from the recent rebound, such as banks.

"This is a highly volatile market," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto, Canada. "It has suddenly shifted to big energy and financial shares are a little weaker."

The Dow Jones industrial average .DJI gained 22.28 points, or 0.17 percent, to 13,311.73. The Standard & Poor's 500 Index .SPX added 0.70 points, or 0.05 percent, to 1,469.72. The Nasdaq Composite Index .IXIC rose 5.22 points, or 0.20 percent, to 2,668.13.

PLAYING DEFENSIVE

Exxon was second-biggest contributor, behind Altria Group Inc (MO.N), to the S&P 500 and the Dow's climb, ending up 0.8 percent at $88.59 on the New York Stock Exchange.

Shares of ConocoPhillips (COP.N) gained 1.4 percent at $78.82, while Chevron (CVX.N) gained 0.6 percent to $86.56.

Shares of Altria, parent of cigarette maker Philip Morris, ended up 2.6 percent at $75.98 on the NYSE, after surging to an all-time high of $76.15.

Companies that make consumer staples such as cigarettes, fast-food and soft drinks are seen as better investments in the face of a slowing economy.

AT&T, APPLE RING UP GAINS

AT&T Inc (T.N), the No. 1 U.S. mobile provider, also stood out, ending up 1.4 percent at $38.03. Its chief executive announced 2008 plans for a new version of Apple Inc's (AAPL.O) iPhone with high-speed wireless Web links.

Apple shares lent the biggest boost to the Nasdaq's advance, ending up 2.3 percent at $184.29.

But after the bell, Dell Inc (DELL.O), the world's second-largest personal computer maker, gave a cautious outlook despite reporting a higher quarterly profit, sending its stock down nearly 7 percent.

Dell shares had ended up 1.6 percent at $28.14 on the Nasdaq ahead of its results.

FINANCIALS RETREAT

In the regular session, financial shares headed lower after a two-day surge.

Shares of American Express (AXP.N) were among the Dow's top drags, down 0.9 percent at $56.89. Lehman Brothers Holdings Inc LEH.N declined 4.9 percent to $61.69 on the New York Stock Exchange after CIBC World Markets analyst Meredith Whitney cut her price target and profit estimates.

Retailers were led lower by Sears Holdings (SHLD.O), which reported sharply lower earnings. Sears stock lost 10.5 percent to $104.09, while Macy's Inc (M.N) was down 1.7 percent at $29.30.

U.S. crude for January delivery last traded up 38 cents at $91 a barrel on the New York Mercantile Exchange, where it ranged from $90.43 to $95.17.

ECONOMY, THE FED

In economic news, softer-than-expected new-home sales and a surge in new claims for jobless benefits reported on Thursday heightened fears of a steep U.S. economic slide and overshadowed a strong third-quarter performance.

Trading was light on the New York Stock Exchange, with about 1.33 billion shares changing hands, below last year's estimated daily average of 1.84 billion. On Nasdaq, about 2.17 billion shares changed hands, above last year's daily average of 2.02 billion.

Even with gains on the session, declining stocks outpaced advancers by a ratio of about 6 to 5 on both the NYSE and the Nasdaq.

(Editing by Leslie Adler)