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* Initial claims drop 14,000 from previous week
* Existing home sales hit 10-month high
* Family Dollar rejects Dollar General's buyout offer
* Jackson Hole conference of central bankers to begin
* Dow up 0.5 pct; S&P 500 up 0.4 pct; Nasdaq up 0.1 pct (Updates to afternoon)
By Akane Otani
NEW YORK, Aug 21 (Reuters) - U.S. stocks rose on Thursday after a flurry of economic data showed an improving economy and as investors awaited the start of a central bankers' meeting in Jackson Hole, Wyoming.
The S&P 500 climbed above its previous intraday record of 1,991.39, set on July 24, in Thursday morning trading. Investors are eyeing the benchmark index's approach to 2,000, a significant level it has yet to breach.
Market participants also refrained from making big bets on Thursday ahead of the start later today of the policymakers' meeting in Jackson Hole, which could provide clues on the timing of an interest-rate hike. U.S. Federal Reserve Chair Janet Yellen is scheduled to speak at the Jackson Hole conference on Friday.
"Overall, with the S&P reaching a new high and the Dow back above 17,000, you're seeing a bullish tone in the market," said Lawrence Glazer, managing partner at Mayflower Advisors in Boston.
"But the real question will be, with the bullish economic data, will Yellen's comment in Jackson Hole remain as dovish as the market hopes it will be?"
U.S. economic data, including a jump in existing home sales to a 10-month high and a sharp drop in initial jobless claims, pointed to an economy that is slowly gaining strength.
The Dow Jones industrial average rose 91.39 points, or 0.54 percent, to 17,070.52. The S&P 500 gained 7.3 points, or 0.37 percent, to 1,993.81. The Nasdaq Composite added 6.30 points, or 0.14 percent, to 4,532.78.
The S&P 500 kept extending its record intraday high, touching 1,994.14 in late afternoon trading.
Bank of America Corp shares shot up 3.8 percent to $16.11 after the company reached a record $16.65 billion settlement with the U.S. government to settle charges that the bank and companies it bought had misled investors into buying troubled mortgage-backed securities. The stock's rally helped lift the S&P 500 financial sector index to its highest level since June 2008.
Technology shares advanced, with Hewlett-Packard gaining 6.2 percent to $37.30 a day after the computing company posted a surprising increase in quarterly revenue. Shares of eBay jumped 4.9 percent to $56.02 on a report that the company was mulling a spinoff of its PayPal unit as soon as next year. The S&P technology index added 0.6 percent.
Family Dollar Stores Inc rejected Dollar General Corp's $8.95 billion acquisition offer, citing antitrust concerns, and reaffirmed its support for a buyout offer from Dollar Tree Inc.
Family Dollar shares slipped 0.3 percent to $79.55 and Dollar General dipped 0.3 percent to $63.60. Dollar Tree also reported quarterly results; its stock fell 1.1 percent to $54.40.
Sears Holdings tumbled 7.7 percent to $33.18, putting it on track for its biggest percentage drop since January, after the owner of Sears department stores and the Kmart discount chain reported a ninth straight quarterly loss. Sears also said it might close more stores than planned this year. (Editing by Bernadette Baum, Nick Zieminski and Jan Paschal)