By Lucia Mutikani

WASHINGTON (Reuters) - The number of newly laid off U.S. workers filing claims for unemployment aid rose last week and sales of previously owned homes fell in March, according to data on Thursday that showed the economy still sliding downward.

First-time claims for jobless benefits rose 27,000 to 640,000 last week, the Labor Department said. In addition, the number of people still drawing benefits after an initial week of aid jumped 93,000 to a record 6.14 million in the week ended April 11.

It was the 14th straight week in which the so-called continuing claims hit an all-time high and underscored the difficulties that laid off workers were experiencing to rejoin the labor force.

While initial filings rose, analysts noted they remained below the 26-1/2 year high of 674,000 touched in late March, suggesting a moderation in the pace of economic decline. Analysts are closely watching initial claims for clues as to when the 16-month old recession might end.

"That number is supportive of the argument that we are stabilizing a little bit, but it does not mean we are at a point where we're going to start recovering any time soon," said Omair Sharif, economist at RBS Greenwich Capital in Greenwich, Connecticut.

Analysts took the same view of the home sales data. Sales fell 3 percent, but still appeared to be carving out a bottom.

U.S. stocks rose, cheered by above forecast earnings from several regional banks. Investors had earlier taken a dim view of the economic data. The Dow Jones industrial ended up 70.49 points at 7,957.06, while the S&P 500 climbed 8.37 points to 851.92.

Government bond prices nudged higher, but gains were capped amid worries over an expected deluge of new debt supply to fund programs to rescue the economy and financial sector.