Stocks rallied on Thursday, one day after the worst plunge since the bull market began in 2009, as an unexpected drop in jobless claims and improved corporate earnings tempered concern that Europe's debt crisis is worsening.
The Dow Jones industrial average closed up 423.37, or 3.95%, at 11,143.31; the S&P 500 rose 51.88, or 4.63%, closing at 1,172.64; and the Nasdaq composite was up 111.63, or 4.69%, to close at 2,492.68. All numbers are preliminary.
All 10 groups in the Standard & Poor's 500 advanced at least 2.1%, with gains being led by financial and energy companies..
“We're in the process of trying to establish a bottom,” James Paulsen, chief investment strategist at Wells Capital Management, which oversees about $340 billion, said in a telephone interview. “The jobless claims number was calming in the middle of the storm. It's a good reminder that — hey, we have stuff going on in Europe, but if the economy does not roll into a recession, there's no reason for stocks to be selling at these levels.”
Almost $3 trillion has been erased from U.S. equity values in the last three weeks as Europe's debt concern, signs the economy is slowing and S&P's downgrade of the government's AAA credit rating left the benchmark gauge for U.S. shares within 30 points of a bear market. Both European shares and the Russell 2000 index of small companies entered a bear market this week, falling at least 20% from their previous highs.
The market was buoyed by a Labor Department report that claims for unemployment insurance payments in the U.S. unexpectedly fell last week to a four-month low. First-time applications for jobless benefits decreased 7,000 in the week ended Aug. 6 to 395,000, the fewest since early April.
A separate report showed that the U.S. trade deficit unexpectedly increased in June to the highest level since October 2008 as a slump in exports exceeded a decline in shipments from overseas.
Benchmark indexes were also lifted by improved corporate earnings. Since July 11, about 76% of S&P 500 companies that have released quarterly results beat projections, according to data compiled by Bloomberg. Earnings per share have increased 17%, while sales rose 13%.
A rout in global equity markets since July 26 had erased $7.9 trillion in equity values through Wednesday.