US STOCKS-Wall St rises as jobless claims fall, dollar weakens

* 4-week jobless claims average near 15-year low

* Dollar falls to a near 4-month low

* Avon spikes on purported offer; company denies receiving offer

* Indexes up: Dow 1 pct, S&P 0.9 pct, Nasdaq 1.2 pct (Updates to early afternoon)

By Tanya Agrawal

May 14 (Reuters) - U.S. stocks rose sharply on Thursday as weekly jobless claims fell and the dollar slid to its lowest in nearly four months amid a choppy bond market.

Initial claims for state unemployment benefits slipped by 1,000 to a seasonally adjusted 264,000 last week, while the 4-week jobless average stayed near a 15-year low.

The dollar was at its lowest since January against a basket of currencies of major U.S. trading partners. That's good news for companies that have large foreign sales as it increases the value of those sales when converted to the U.S. currency.

"A lot of people are looking at the data as non-inflationary, which leads them to believe that the Fed might delay raising rates," said Jeff Powell, chief investment officer of Polaris Wealth Advisers, in San Francisco, which oversees $600 million.

"It's basically a question of where else to invest since bond prices are going up."

Prices of 30-year U.S. Treasuries turned negative due to weak demand in an auction of bonds worth $16 billion. The yield on 10-year U.S. Treasuries fell to 2.25 percent after closing at a five-month high of 2.28 percent on Wednesday.

The recent jump in yields has made equities look more expensive in comparison to debt, keeping global share markets subdued.

At 12:55 p.m. ET (1655 GMT) the Dow Jones industrial average was up 177.57 points, or 0.98 percent, at 18,238.06. It had earlier touched a more than 2-month high.

The S&P 500 was up 18.08 points, or 0.86 percent, at 2,116.56, while the Nasdaq Composite was up 57.90 points, or 1.16 percent, at 5,039.59 and had touched a 10-day high.

All of the 10 major S&P 500 sectors were higher, with the tech index's 1.3 percent rise leading the way. Apple (Swiss: AAPL.SW - news) shares rose 1.7 percent to $128.36, making the stock the biggest driver on both the Nasdaq and S&P 500.

Apple (NasdaqGS: AAPL - news) 's quarterly dividend, which many shareholders reinvest, was payable on Thursday.

Lower-than-expected quarterly sales reported by department store operator Kohl's weighed on the consumer index . Kohl's shares fell as much as 12.3 percent to a 3-month low of $65.34.

Avon Products (NYSE: AVP - news) jumped as much as 27.4 percent after a regulatory filing from a firm said it had offered to buy the cosmetics company for nearly three times its market value.

Avon said it had not received an offer. Almost 50 million shares had changed hands by 12:52 p.m. ET, making it the most actively traded stock on U.S. markets on Thursday.

Some cancer drug makers were among the top movers after they released trial data.

Puma Biotechnology (NYSE: PBYI - news) plunged 17.9 percent to $172.17 after disappointing trial results for its experimental breast cancer pill.

Vascular Biogenics (NasdaqGM: VBLT - news) soared 40 pct to $5.71 and Oncothyreon (NasdaqGS: ONTY - news) rose 29 pct to $1.91 after their drugs showed promise in trials.

Shake Shack (NYSE: SHAK - news) rose 6.5 percent to $72.82 after the hamburger chain reported a surprise adjusted quarterly profit and raised its full-year revenue forecast. The stock debuted in January at a listing price of $21.

Advancing issues outnumbered decliners on the NYSE by 2,366 to 654, for a 3.62-to-1 ratio on the upside; on the Nasdaq, 1,922 issues rose and 742 fell for a 2.59-to-1 ratio favoring advancers.

The S&P 500 index posted 23 new 52-week highs and 5 new lows; the Nasdaq Composite recorded 75 new highs and 23 new lows. (Editing by Saumyadeb Chakrabarty)