By Edward Krudy

NEW YORK (Reuters) - U.S. stocks rose on Thursday as Wall Street continued its roller coaster ride ahead of cliffhanger Greek elections on the weekend and the Federal Reserve's policy meeting next week that some hope may bring more easy money policies.

Market swings will likely persist ahead of the Sunday elections, analysts said. The prospect that the results of the Greek vote could lead the nation to exit the euro zone has pressured U.S. equities over the past several weeks.

Each trading day has been almost a reverse image of the previous one, with the market swinging around 1 percent in the opposite direction to the prior day all this week. The net result is that the S&P 500 is flat on last Friday's close.

"We have been in an extended period of not just volatility but dysfunction for quite some time and it seems as though just recently that dysfunction has taken on a whole other dimension," said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.

"The volatility is in such short bands of time that even traders tend to get less enthusiastic about catching inefficiencies and trading trends because of the whipsaw; the risk reward is not attractive."

The number of Americans filing new claims for unemployment benefits unexpectedly rose last week. Some investors are hoping the Fed may signal more easy money to counter sluggish growth when it releases its policy statement next Wednesday.

The Dow Jones industrial average <.DJI> gained 119.92 points, or 0.96 percent, to 12,616.30. The Standard & Poor's 500 Index <.SPX> rose 10.96 points, or 0.83 percent, to 1,325.84. The Nasdaq Composite Index <.IXIC> added 12.09 points, or 0.43 percent, to 2,830.70.

Trading came on low volume as weak data in the U.S. labor market and rising bond yields in Italy and Spain weighed on investor sentiment.

"This is a classic rumor-driven market where the nervous shorts cover their shorts and the under-invested longs go and buy, just by looking at the headlines. There is the fear of missing out," said James Dailey, portfolio manager of TEAM Asset Strategy Fund.

That was highlighted as Greek bank stocks surged more than 20 percent on Thursday, with speculators appearing to be betting on a favorable pro-bailout outcome after the June 17 election. The action there drew the attention of traders stateside.

"Greek stocks are in rally mode on hopes for a decisive victory for the conservative New Democracy party," said Andrew Wilkinson, chief economic strategist at Miller Tabak & Co in New York.

In other U.S. data, consumer prices fell 0.3 percent in May, the biggest drop in more than three years. That could give the Fed further room to ease policy next week.

"What you are seeing today is investors really embracing two things - inflation expectations and the slowdown in the recovery and the jobs market and what that means for maybe future quantitative easing," said Joshua Schachter, portfolio manager at Snow Capital Management in Sewickley, Pennsylvania.

Moody's Investor Service cut its rating on Spanish government debt on Wednesday by three notches to Baa3, saying the recently approved euro zone plan to help Spain's banks will add to the country's debt burden.

The S&P is flat for the week as sharp drops have been partially offset by some equally strong rallies. So far in the second quarter, however, the index is down 5.9 percent.

"The decline may have gone far enough that prices may at least avoid slipping further, but there is still a lot of uncertainty out there," said Bruce McCain, chief investment strategist at Key Private Bank in Cleveland.

Nokia Corp plans to cut 10,000 more jobs, a fifth of its work force, and said its phone unit would post a deeper-than-expected loss in its second quarter because of tough competition. U.S.-listed shares plunged 15.4 percent to $2.36.

(Additional reporting by Chuck Mikolajczak and Angela Moon, editing by Dave Zimmerman)