* Sprint volume surges, shares jump on Softbank deal reports
* Citigroup sees US stocks as "overweight"
* Safeway down after missing Wall St estimates
* Indexes up: Dow 0.54 pct, S&P 0.73 pct, Nasdaq 0.68 pct
By Atossa Araxia Abrahamian
NEW YORK, Oct 11 (Reuters) - U.S. stocks rose on Thursday after data showed initial jobless claims at their lowest in more than four and a half years, pointing to signs of continued improvement in the jobs market.
Sprint Nextel Corp shares jumped 19 percent to $5.98 on news Japan's Softbank Corp was in talks to buy a majority stake in the wireless carrier. A transaction would represent a new shakeup in the rapidly changing U.S. wireless market and possibly reflect a more conducive environment for corporate deals.
More than 320 million shares of Sprint Nextel changed hands in U.S. trading by 11:30 a.m. ET (1530 GMT), making it the busiest day in the stock's history.
Clearwire Corp, in which Sprint holds a majority interest, surged 38 percent to $1.79. MetroPCS shares dropped 6.2 percent to $11.29 as a Softbank deal would rule out Sprint making a counter-bid.
"The Sprint-Nextel deal shows there are deals to be had," said Brian Amidei, managing director and partner at wealth management firm HighTower Advisors. "It shows there is still corporate growth, and that companies are looking to find ways to grow their footprint even in this economy."
The number of Americans filing new claims for unemployment benefits last week dropped by 30,000 to a seasonally adjusted 339,000, against the 370,000 economists had predicted.
The jobs report follows last week's report that said September's unemployment rate fell to 7.8 percent.
The gains come after the S&P 500's biggest four-day drop since late July. The benchmark is down 2 percent amid concern about the effect of slowing world growth. The S&P 500 is down dropped 0.6 percent thus far in October.
The Dow Jones industrial average was up 72.49 points, or 0.54 percent, at 13,417.46. The Standard & Poor's 500 Index was up 10.44 points, or 0.73 percent, at 1,443.00. The Nasdaq Composite Index was up 20.84 points, or 0.68 percent, at 3,072.62.
Citigroup upgraded its stance on U.S. equities to "overweight" in a note this morning, citing cheap equity valuations and aggressive central bank actions to stimulate the economy.
Shares of supermarket chain Safeway Inc, the second-largest U.S. supermarket chain, fell nearly 5 percent after it missed Wall Street's targets. Competitor Walmart was up 0.5 percent to $75.74 after hitting a 52-week high on Wednesday.
Earlier this month, the National Retail Federation forecast 4.1 percent growth in sales for the coming holiday season, compared to 5.6 percent growth in 2011.
Other data showed the U.S. trade deficit widened in August to $44.2 billion. U.S. exports fell for a fifth consecutive month and imports declined slightly, hinting at weaker U.S. and global demand.