* Claims data, Philly Fed add to recovery hopes
* Merck, McDonald's among standouts
* Dow, S&P 500 up about 1 pct; Nasdaq up 0.2 pct (Updates to early morning)
By Ellis Mnyandu
NEW YORK, June 18 (Reuters) - U.S. stocks rose on Thursday, buoyed by economic data pointing to stabilization in the job market and improving regional business conditions in the Mid-Atlantic area.
Government data showed that though initial claims for jobless benefits were higher-than-expected, continued claims posted their first drop since January, to 6.69 million from a revised 6.84 million the previous week, and marked the largest one-week drop in that series since November 2001.
The Philadelphia Federal Reserve's business activity index for the Mid-Atlantic region in June was still negative but was much better than economists' expectations and the survey's May reading.
"We're still in this healing process and this is one of the better indications that manufacturing may be getting better," said Kurt Brunner, portfolio manager at Swarthmore Group in Philadelphia, Pennsylvania. "The Philadelphia Fed number was a good number. It's still negative, but it's much better than what people had anticipated."
The Dow Jones industrial average gained 76.11 points, or 0.90 percent, to 8,573.29. The Standard & Poor's 500 Index climbed 8.84 points, or 0.97 percent, to 919.55. The Nasdaq Composite Index rose 3.04 points, or 0.17 percent, to 1,811.10.
Standouts included financials shares. Among the Dow's top boosts were shares of 3M Co, a diversified manufacturer, up 1.1 percent to $59.65, while shares of bellwether Apple Inc, up 1.3 percent, underpinned the Nasdaq.
Even so, shares of healthcare companies and other defensive names -- deemed better positioned to withstand a still uncertain economy -- fared better by far. Merck & Co Inc jumped 3.1 percent to $25.52, while McDonald's Corp shot up 2 percent to $58.50.