NEW YORK, Feb 17, 2011 (Dow Jones Commodities News via Comtex) -- Copper futures erased losses to end a two-day losing streak Thursday as positive manufacturing data boosted the demand outlook for the industrial metal.

The most-actively traded copper contract, for March delivery, rose 1.4 cents, or 0.3%, to settle at $4.4840 a pound on the Comex division of the New York Mercantile Exchange.

"We're probably still in a very bullish market," said Scott Meyers, senior trading analyst with the Pioneer Futures division of MF Global. "Everything hinges on how well stocks hold up."

Copper gained alongside equities as firmer manufacturing data increased optimism about the economic recovery and growth-sensitive assets. The metal often tracks with stocks as a proxy on the wider economy because it is widely used to make wires, pipes and sheets for electronics, buildings, automobiles and appliances. Shortly after copper closed, the Dow Jones Industrial Average was up 0.1% at 12300.24 points.

Stocks and copper were supported as the Federal Reserve Bank of Philadelphia's index of general business activity beat expectations to hit its highest level since January 2004, jumping to 35.9 from 19.3 the month before. Even though factories represent a relatively small part of total U.S. economic performance, they tend to serve as a leading indicator, and the strong reading was seen as a positive signal of the economy's momentum.

That was enough to boost copper even though separate data showed the U.S. labor market remained sluggish. Initial jobless claims increased by 25,000 to 410,000 in the week ended Feb. 12, the Labor Department said in its weekly report.

Copper's bounce Thursday came after the metal hit an intraday low of $4.4155, its softest point since Jan. 31.

Prices for the metal have fallen over the previous two sessions as investors cashed in on the metal's all-time high of $4.6495 hit

Tuesday. Some have begun to question whether physical demand justifies prices that high.

Those worries have been exacerbated by rising inventory levels.

Inventories of copper stored in London Metal Exchange warehouses rose 1,400 metric tons Thursday, leaving them at 407,200. The most recent Comex inventory data, released late Wednesday afternoon, were up 417 short tons at 77,867 short tons.

Nevertheless, copper appears to have held onto important price support levels.

"It's found support in this general $4.50 area," said Ira Epstein, director of the Ira Epstein division of the Linn Group. "You're establishing a trading range. The bias is to the upside."

Copper settlements (ranges include electronic and pit trading):

Mar $4.4840; up 1.40 cents; Range $4.4155-$4.5170
May $4.4970; up 1.45 cents; Range $4.4275-$4.5280