(By Salman - iStockAnalyst Writer)

US Stocks edged higher on Thursday after a government report showed economy contracted less than anticipated in the third quarter. Positive earnings and rate cut optimism also buoyed sentiments.

The Dow Jones Industrial Average jumped 189.73 points, (+2.11%), to finish at 9,180.69. The S&P 500 climbed 24 points (2.58%) to 954.09. The Nasdaq Composite rose 41.31 points, (+2.49%) to 1,698.52.

According to a Commerce Department release, U.S. economy shrank at a 0.3% annualized rate in the third quarter. Economists had forecast G.D.P to decline at an annualized rate of 0.5% in third quarter. In second quarter the GDP rose 2.8%.

A separate release by Department of Labor on Thursday showed number of Americans filing first- time claims for unemployment benefits remained unchanged at 479,000 last week. Economists had forecast jobless claims to fall to 473,000 from 478,000 in previous week. The four-week average of seasonally adjusted initial jobless claims fell 5,000 to 475,500.

On Wednesday, US Federal Reserve lowered the benchmark interest rate by 50 basis points to 1%. The Fed hinted at further possibility of rate cuts when it said, "We will not stand down until we have achieved our goals of repairing and reforming our financial system and restoring prosperity." The Fed also announced to open swap lines of $30 billion each to the central banks of Brazil, Mexico, South Korea and Singapore. The Fed set up "liquidity swap facilities with the central banks of these four large systemically important economies" effective until April 30, the central bank said yesterday in a statement. The arrangements aim "to mitigate the spread of difficulties in obtaining U.S. dollar funding."

Irving, Texas based Oil major Exxon Mobil Corp. (XOM) reported that its third-quarter net income rose 58% to a record $14.8 billion, or $2.86 a share from $9.4 billion, or $1.70 a share in the same quarter in 2007.Excluding one time items, earnings rose 42% to $13.38 billion, or $2.59 a share, from $9.4 billion, or $1.70 a share. Exxon reaffirmed its target for 2008 capital and exploration spending of $25 billion. Analysts on an average were expecting the company to earn $2.38. Shares of Exxon finished at $75.05, up 40 cents or 0.54 in Thursday's session.

Shares of Colgate-Palmolive Co.(NYSE: CL) jumped $4.23 or 7.05% after if posted a better than expected earnings. The company announced its net income in third quarter rose to $499.9 million, or 94 cents a share, from $420.1 million, or 77 cents, a year ago. Revenue climbed to $4 billion from $3.53 billion.

Schaumburg, Illinois based mobile phone maker Motorola Inc.(NYSE: MOT) , reported a surprise third quarter loss of $397 million, or 18 cents a share, compared with a profit of $60 million, or 3 cents, in the same quarter, a year ago. The loss includes 23 cents-a-share of charges, write-downs and other one-off items.