* S&P 500 comes off three straight days of gains
* Jobless claims jump more than expected in latest week
* Verizon and Travelers rally after results
* Dow up 0.2 pct, S&P 500 up 0.2 pct, Nasdaq off 0.1 pct
By Chuck Mikolajczak
NEW YORK, Oct 18 (Reuters) - U.S. stocks edged higher on Thursday in the wake of a three-day rally as weaker-than-expected jobless claims data was offset by positive earnings reports from Verizon and Travelers Companies.
The S&P 500 index had gained 2.3 percent over the past three days, ending Wednesday just 0.33 percent shy of the year's closing high. The run has been fueled by an earnings season that appears in its early stages to be less bleak than investors had initially anticipated.
Weekly jobless claims rose much more than expected in the latest week to 388,000, coming off an unexpectedly sharp decline in the previous week. Analysts had expected claims to rise to 365,000, though a Labor Department official said it appeared state-level administrative issues were distorting the data.
A pair of Dow components rallied after reporting results and were the two biggest gainers in the blue-chip average. Verizon Communications Inc reported revenue that slightly exceeded expectations while U.S. property and casualty insurer Travelers Cos posted record operating earnings that were much stronger than expected.
Travelers gained 3.8 percent to $74.12. Verizon rose 3.6 percent to $46.33. The S&P telecom sector index, up 2.4 percent, was the best performer among the S&P 500's 10 major sectors.
"Third-quarter earnings are not spectacular, that's for sure. But the bar is so low that as long as the businesses aren't falling apart, the earnings aren't collapsing, that is good enough to keep the stock prices pretty much where they are at," said Doug Foreman, director of equities at Kayne Anderson Rudnick Investment Management in Los Angeles.
"So while the absolute numbers aren't great, they are better than what people have expected, and of course, that is the key to how stock prices react."
The Federal Reserve Bank of Philadelphia said its index of business conditions in the U.S. Mid-Atlantic region rose more than expected in October, climbing to 5.7 from -1.9 in September. Analysts were looking for a gain of 1.0.
The Dow Jones industrial average gained 25.28 points, or 0.19 percent, to 13,582.28. The Standard & Poor's 500 Index rose 2.61 points, or 0.18 percent, to 1,463.52. The Nasdaq Composite Index dropped 2.30 points, or 0.07 percent, to 3,101.82.
Stocks have been range-bound for the past month in the wake of the U.S. Federal Reserve's announcement on Sept. 13 of its latest plan to stimulate the economy.
The S&P 500 has oscillated between almost five-year highs after the Fed's announcement to touching its technical support level of the 50-day moving average earlier in the week. Many analysts expect the benchmark index to continue to churn within that range until after the U.S. election in November.
According to Thomson Reuters data through Thursday morning with 19 percent of S&P 500 companies having reported results, 64.9 percent have beaten analysts' expectations. The average since 2002 has been a beat rate of 62 percent.
Quarterly earnings are expected to drop 1.5 percent from a year ago, an improvement from the forecast earlier in the week calling for a decline of 2.3 percent.
While investors' focus has shifted toward earnings and economic data recently, market participants are keeping an eye on Europe for developments on plans to deal with debt in Spain and Greece.
Ahead of a summit meeting of EU leaders scheduled for Thursday, German Chancellor Angela Merkel demanded stronger authority for the executive European Commission to veto national budgets that breach EU rules. However, French President Francois Hollande said the issue was not on the summit agenda and the priority was to get moving on a European banking union.