NEW YORK – NEW YORK (AP) — Stocks surged higher after another series of upbeat earnings reports and a reading on unemployment provided more evidence of an improving economy.
The Dow Jones industrials rose 122 points Thursday after the Labor Department said initial claims for unemployment benefits fell last week. And companies including Motorola, Time Warner Cable and Starwood Hotels & Resorts reported earnings that topped analysts' forecasts.
It was the market's second straight winning day after a plunge Tuesday that took the Dow down 213. Greece's debt problems, one of the triggers for that slide, appeared less dire Wednesday and Thursday, and that allowed investors to focus on the growing signs of healing in the U.S.
The Labor Department said first-time claims dipped to 448,000, slightly above analysts' forecast of 445,000, according to Thomson Reuters. It was the second weekly drop and lifted hopes that layoffs are slowing.
Dealmaking and strong corporate earnings reports added to the growing optimism.
Hewlett-Packard Co. said late Wednesday it is buying smart phone maker Palm Inc. in an all-cash deal worth $1.4 billion. Acquisitions are a sign that the economy is recovering and companies are comfortable spending cash to build their businesses.
"Business are in a very strong position financially," said Doug Lockwood, chief investment officer at Cornerstone Wealth Management in Auburn, Ind. Companies have built up big cash reserves that can not only go toward deals, but also eventually to hire back workers, Lockwood said.
Companies including Motorola, Time Warner Cable and Starwood Hotels & Resorts reported earnings that topped analysts' expectations, as have many other companies that announced first-quarter results in recent weeks.
"It just seems like the market is moving and moving and nothing is going to get in its way," said Steve Stahler, president of the Stahler Group Inc. in Baton Rouge, La.
On Friday, the government will give its first assessment of overall economic activity during the first quarter when it issues the gross domestic product. Analysts surveyed by Thomson Reuters forecast that the economy grew at an annual rate of 3.4 percent, down from 5.6 percent in the fourth quarter. However, many economists have warned for months that the hectic pace at the end of 2009 would not be sustained, so a lower rate of growth won't be seen as a negative — as long as it meets or beats expectations.
The Dow rose 122.05, or 1.1 percent, to 11,167.32, bringing its two-day advance to 175.33. The Standard & Poor's 500 index rose 15.42, or 1.3 percent, to 1,206.78, while the Nasdaq composite index rose 40.19, or 1.6 percent, to 2,511.92.
European stock markets rose Thursday after two days of steep declines. On Wednesday Spain became the third European country this week to see its debt rating slashed by Standard & Poor's, following Greece and Portugal.
There are concerns that debt problems will spread across the continent and slow a global economic recovery. The most pressing problems are in Greece, which is still trying to tap a bailout package worth nearly $60 billion. European Union officials said again Thursday that Greece would have access to the money that will help it avoid defaulting on debt payments next month. The downgrades of Greek and Portuguese debt on Tuesday sent indexes worldwide tumbling.
Guy LeBas, chief fixed income strategist of Janney Montgomery Scott in Philadelphia, said the Greece crisis is "the tip of the iceberg for the European Union."
The debt crisis has the potential to drag down a European economic recovery and lead to a collapse of the euro, a currency shared by 16 member nations, LeBas said. That could hurt the recovery in the U.S. and other countries as well.
Some analysts said investors were overreacting to the situation in Europe when they sent stocks tumbling Tuesday. But analysts also acknowledged that the market was due for a pullback after moving steadily higher for months. When stocks go in one direction for a sustained period of time, market watchers worry that investors are buying or selling indiscriminately.
Earnings were one of the primary drivers of stocks Thursday.
Starwood Hotels & Resorts Worldwide Inc.'s profit jumped sharply as more people checked in its hotels, including the Sheraton, W, and Westin. Drug maker Bristol-Myers Squibb Co., phone maker Motorola Inc. and Time Warner Cable Inc. also reported stronger earnings.
Dow component ExxonMobil Corp.'s profit rose during the quarter, but fell short of expectations. Exxon Mobil fell 53 cents, or 0.8 percent, to $68.66.
Starwood Hotels & Resorts rose $3.02, or 5.7 percent, to $56.29, while Bristol-Myers Squibb rose $1.03, or 4.2 percent, to $25.37. Motorola jumped 24 cents, or 3.5 percent, to $7.16 and Time Warner Cable rose $4.02, or 7.6 percent, to $57.15.
Hewlett-Packard shares fell 40 cents to $52.88, while Palm surged $1.21, or 26 percent, to $5.84.
About three shares rose for every one that fell on the New York Stock Exchange, where volume came to 1.41 billion shares.
Bond prices rose slightly after an auction for $32 billion in seven-year Treasury notes. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.73 percent from late Wednesday's 3.77 percent.
Gold fell, while oil rose.
The Russell 2000 index of smaller companies rose 15.35, or 2.1 percent, to 737.74.
Overseas, Britain's FTSE 100 rose 0.6 percent, Germany's DAX index gained 1 percent, and France's CAC-40 rose 1.4 percent. Japan's market was closed for a holiday.