Financial and technology stocks powered a dramatic, though volatile, rebound in the stock markets Thursday, as worries over the health of banks and the economy subsided for a day.
Investors were also cheered by a better-than-expected report on jobless claims. The blue-chip Dow Jones industrial average closed up about 4 percent, or about 423 points, to close at 11,143.
The Standard & Poor’s 500, a broader market measure, moved up about 4.6 percent to 1,172, while the Nasdaq, a tech-heavy index, was up about 4.7 percent to 2,493.
As stocks rose, safe bets such as gold and Treasurys finally saw a pull-back. Gold prices fell to $1,768, down about $14 from their previous record close, while the yield on the 10-year Treasury inched higher to about 2.3 percent. A lower yield means investors are willing to accept a smaller return in exchange for the safety of holding government debt, while a higher yield indicates they are willing to take riskier bets such as stocks.
The market gains came on the back of fresh data from the Labor Department showing that 395,000 people filed for initial unemployment claims last week, 10,000 fewer than economists had expected. It was the first time the figure had fallen below 400,000 since April and represented a positive sign for the economy, since filings above that threshold typically indicate an economy losing steam.
“Labor markets are stabilizing, but at this stage of the game you worry about the fear in the financial markets becoming a full-fledged panic,” said Diane Swonk, chief economist at Mesirow Financial in Chicago. If that happens, Swonk said, consumer confidence could dip even further and perhaps push the economy into recession. “We’re still in a pretty precarious situation,” she said.
An upbeat earnings report from Cisco Systems also gave the markets a lift. The technology firm’s smaller-than-expected decline in quarterly profits helped boost its stock by 16.3 percent to $15.97 per share. Bank of America, News Corp. and General Electric were the day’s other big gainers.
Both U.S. and European markets declined by more than 4 percent Wednesday amid signs the debt crisis in Europe could bring renewed troubles to big banks.
In Europe, those fears subsided Thursday as bank stocks powered a rise in stock markets. London’s FTSE 100 index and Germany’s DAX were both up more than 3 percent. France’s CAC-40 recorded a 2.9 percent gain.
Asian markets bounced back early Friday. Japan’s blue-chip Nikkei 225 index opened 64 points above the key 9,000 benchmark, a gain of nearly 1 percent. The Nikkei slipped slightly below the 9,000 mark during the morning session, which ended up 0.17 percent.
U.S. markets also shrugged off news of a widening U.S. trade deficit, which rose $2.3 billion in June to $53.1 billion as exports fell, the Commerce Department reported. That was bad news for the economy, Swonk said, since lower exports translate to less demand for U.S. businesses’ goods and services.
Oil prices also crept up to about $85 per barrel.
Staff writer Sarah Halzack contributed to this report.