NEW YORK - STOCKS extended their advance in early trading on Thursday following a better-than-expected reading on the US economy and a drop in jobless claims.

The Commerce Department said gross domestic product rose at an annual rate of 3.3 per cent for the April-June period, as a weaker dollar helped boost US exports.

That exceeded the government's initial estimate of a 1.9 per cent increase as well as economists' forecast of a 2.7 per cent gain.

The growth marked the economy's best performance since the third quarter of last year, when GDP rose at a 4.8 per cent pace.

Investors closely watch GDP to determine whether the economy is picking up momentum after being pounded by housing woes and a debilitating credit crisis.

The economy grew at a weak rate of 0.9 per cent in the first quarter and actually shrank in the last three months of 2007.

Also on Thursday, the Labour Department said the number of newly laid off people seeking jobless benefits fell for the third straight week.

The number of claims dropped to a seasonally adjusted 425,000, down 10,000 from the previous week. That was slightly better than the 427,000 expected by analysts surveyed by Thomson/IFR.

But economists consider claims above 400,000 an indicator of a slowing economy. Companies have cut jobs every month this year as they grapple with rising energy costs and tighter credit.

In the first hour of trading, the Dow Jones industrial average rose 81.67, or 0.71 per cent, to 11,584.18 after rising nearly 90 points on Wednesday.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 9.06, or 0.71 per cent, to 1,290.72, and the Nasdaq composite index rose 12.92, or 0.54 per cent, to 2,395.38. -- AP