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Reports indicating Greece may not proceed with its referendum that threatened to derail Europe's plan to tackle its debt crisis ignited a broad rally on Wall Street. 

Today's Markets

As of 3:06 p.m. ET, the Dow Jones Industrial Average rose 192 points, or 1.62%, to 12,027.84, the S&P 500 gained 20.74 points, or 1.66%, to 1,258.45 and the Nasdaq Composite jumped 50.76 points, or 1.92%, to 2,690.47. 

It has been yet another tumultuous week for Wall Street: the blue chips sold off by nearly 600 points in the first two sessions, only to post a 178-point rally on Wednesday.  All eyes have turned to Europe, where leaders are racing to put out fresh fires that threaten to hinder the bloc's response to its two-year-old sovereign debt crisis. 

The European Central Bank sliced its refinancing rate -- a key interest rate -- by 0.25 percentage points to 1.25% on Thursday in an unexpected move. The ECB has been weighing concerns that the European debt crisis is escalating with worries low interest rates may lead to higher levels of inflation. Mario Draghi has just taken the reins at the ECB from Jean-Claude Trichet, who held the presidency for 8 years.  

Greek Prime Minister George Papandreou Tuesday called for a referendum on the rescue aid as the Greek public has violently protested many of the austerity measures international lenders have pushed for as a condition of the bailout. A "no" vote in the referendum, analysts say, could leave the highly-indebted country with no other choice but to default when its next bond payment comes due next month -- a move that could damage larger economies, and slam the global financial system. 

Pressure heated up on Papandreou on Thursday. Several media outlets reported that Papandreou may imminently resign, paving the way for a unity coalition run by Lucas Papademus, a former governor of the Bank of Greece. There was a separate report later from the Associated Press that Papandreou plans on calling off the highly-unpopular referendum as well. 

The crisis in Europe has already begun impacting U.S. firms. Indeed, MF Global, previously a major player in the derivatives market, filed for Chapter 11 bankruptcy protection less than a week after reporting a $6.3 billion exposure to European sovereign debt. Investment bank Jefferies (JEF) shares plunged 20% on Thursday due to concerns about its own exposure. However, its stock raced back and even briefly turned positive after it released a statement saying it has "no meaningful net exposure" to these assets. 

“The market is really schizophrenic. You can just see the slightest bit of news -- positive or negative -- moves the market in that direction. Everyone reacts instantaneously to the news,” said Jason Weisberg, senior vice president at Seaport Securities. “These swings in the market place are a direct result of that and its’ really scared the long-term players away.”

European blue chips soared 2.5%, while the euro gained 0.09% to $1.38. 

The U.S. economy is also coming squarely into focus, with a slew of important economic data slated for release during the latter part of the week. 

New claims for unemployment benefits fell to 397,000 last week from 406,000 the week prior. Economists were predicting a drop to 400,000. The more closely-watched monthly unemployment report is on tap for Friday, and is expected to show the unemployment rate stuck at 9.1% as the economy struggled to add jobs in light of strong headwinds. 

The services sector expanded at a slower-than-expected pace in October. The Institute for Supply Management's non-manufacturing PMI gauge came in at 52.9 for the month, compared with 53 in September and consensus estimates of 53.5. Readings above 50 point to expansion, while those below indicate contraction. 

Separately, the government said factory orders rose 0.3% in September from the month prior, besting the 0.1% drop that analysts forecasted.

Energy closed mostly higher. Light, sweet crude rose $1.56, or 1.69%, to $94.07 a barrel.  Wholesale RBOB gasoline fell 2 cents, or 0.74%, to $2.61 a gallon. 

Gold jumped $35.50, or 2.1%, to $1,765 a troy ounce.  Yields on government debt ticked higher.  The 10-year Treasury note yields 2.058% from 1.987%. 

Corporate Movers

Kraft (K) slumped almost 8% amid disappointment over its steeper-than-expected 17% slide in third-quarter earnings and lowered guidance. Even the more optimistic end of the new range would trail the Street's view. 

Qualcomm (QCOM) raced 7% higher a day after reporting a 22% rise in quarterly profits that exceeded estimates. The mobile chip maker also issued a bullish guidance for its new fiscal year. 

Foreign Markets

European blue chips rose 2.5%, the English FTSE 100 rose 1.2% to 5,552 and the German DAX jumped 2.8% to 6,132. 

In Asia, the Japanese Nikkei 225 dropped 2.2% to 8,640 and the Chinese Hang Seng tumbled 2.5% to 19,243. 

Follow Adam Samson on Twitter @adamsamson.