* FedEx results miss estimates, raises outlook
* Factory activity in mid-Atlantic unexpectedly improves
* Dow up 0.3 pct, S&P up 0.5, Nasdaq up 0.7 pct (Updates to late morning, changes byline)
By Leah Schnurr
NEW YORK, Dec 16 (Reuters) - U.S. stocks were modestly higher on Thursday after bellwether FedEx offered a bullish forecast, while trade was tight as investors continued to adjust toward year-end.
FedEx Corp raised its full-year outlook on unexpectedly strong holiday volume and an improved economic view, though it reported quarterly profit and revenue that missed expectations.
Its shares rose 2 percent to $94.21 and helped the S&P industrials sector gain nearly 1 percent.
Volume was thin and trading was tight as investors looked for stocks that have performed well for the year and sold off the losers. Analysts expected market action to be sideways for the next two weeks with a bias to the upside.
"I think we'll be in a trading range until January, and I'd be surprised to see moves of more than 2 percent in either direction until then. We're just drifting around," said Jeffrey Friedman, senior market strategist at Lind-Waldock in Chicago.
The Dow Jones industrial average gained 37.62 points, or 0.33 percent, to 11,495.09. The Standard & Poor's 500 Index rose 6.32 points, or 0.51 percent, to 1,241.55. The Nasdaq Composite Index climbed 18.47 points, or 0.71 percent, to 2,635.69.
"Technically, the Dow enters today trading above potential short-term support at the 11,450 level, while resistance at the 11,500 level is still a major barrier to a continued rally," said Joseph Hargett, analyst at Schaeffer's Investment Research in Cincinnati, Ohio.
Economic data provided a positive backdrop, with factory activity in the U.S. Mid-Atlantic region unexpectedly rising in December, while jobless claims dipped for a second week. November housing starts rose, but permits for future home construction dropped to a 1-1/2 year low.
Worries over sovereign debt also kept gains in check. The European Central Bank acted to increase its financial firepower in the euro zone debt crisis by almost doubling its capital to cope with increased credit risk and market volatility.
On the Nasdaq, Wynn Resorts Ltd jumped 4.7 percent to $105.47 after JPMorgan raised its rating to "overweight" from "neutral".