After its worst two-day plunge in two months, the markets appear to have stabilized as Wall Street closed higher for the third day in a row on Thursday despite a surprise jump in jobless claims.

Today’s Markets

The Dow Jones Industrial Average rose 70.89 points, or 0.76%, to 9350.05, the Standard & Poor's 500 gained 10.91 points, or 1.09%, to 1007.37 and the Nasdaq Composite picked up 19.98 points, or 1.01%, to 1989.22. The consumer-friendly FOX 50 added 7.32 points, or 1.01%, to 734.83.

The economic worries that sent the markets tumbling late last week and earlier this week seem to have faded as Wall Street rallied in the face of bleak news on the labor front and weaker-than-expected results from retailers like Sears (SHLD). The renewed bullish sentiment pushed the S&P 500 back above the crucial 1000 threshold and sent the Dow up more than 200 points in three days, recouping almost all of its two-day plunge. 

“The sentiment has been the same since the beginning of July: buyers are in control of the market. Whether that’s justified or not is irrelevant. Right now, stocks cannot go down,” said Michael James, senior equity trader at Wedbush Morgan Securities.

There were a few developments on Thursday for the bulls to hang their hats on, including a surge in China's stock market, upbeat guidance from retailers Dick's Sporting Goods (DKS) and Ross Stores (ROST) and a new manufacturing report that soared to pre-recession levels. But as has been the case for much of the month, Thursday's rally lacked the strong volume that would suggest conviction.

“Now and until the end of the summer we’re going to see diminished volume but we’re going to see this market climbing higher and higher,” NYSE trader Jason Weisberg of Seaport Securities told FOX Business. “And once everyone gets back from vacation, it’s going to be lights out for the bears. We’re going to go straight up. I think [Dow] 10000 is really within earshot.”

Most of the Dow's 30 components closed in the green on Thursday, led by Cisco (CSCO), American Express (AXP) and Boeing (BA). The index's more defensive stocks were left behind, with Pfizer (PFE) and Kraft (KFT) closing modestly lower. 

Financial stocks were among the strongest gainers on Thursday, with the sector gaining more than 2%. Commercial banks like SunTrust Banks (STI) and Fifth Third Bancorp (FITB) helped lead the sector rally, closing sharply higher.

Wall Street's resiliency was on display again as the markets shrugged off the Labor Department's latest jobs data, which revealed that initial jobless claims unexpectedly rose last week by 15,000 to 576,000. The government also said the four-week moving average for claims jumped to the highest level since July 11 and continuing claims rose by 2,000 to 6.24 million. 

The figures underscore the turbulence still facing the labor markets and thus the U.S. consumer, which the markets are relying on to provide a boost as the economy looks to rebound later this year.

On a positive note, the Philadelphia Federal Reserve said its manufacturing index soared to a 4.2 reading in August, compared to -7.5 the month before. It was the highest level since November 2007, the month before the current downturn began. Economists had predicted the index would improve, but only to a -2.0 reading. 

Wall Street received another read on the U.S. consumer via a slew of mixed quarterly reports from retailers. While Sears (SHLD) posted an unexpected second-quarter loss and videogame retailer GameStop (GME) missed estimates, Barnes & Noble (NKS) beat the Street and Ross Stores (ROST) lifted its guidance.

Meanwhile, the bulls cheered a wave of buying overseas, where China’s Shanghai Composite surged 4.5% to climb out of bear market territory.

Traders have been carefully watching the action in China, which Wall Street has been hoping would lead the global economy out of recession. Chinese stocks have plunged in recent days, bolstering the bears’ case that stocks have gotten too far ahead of the economy.

Like the stock markets, crude oil finished in the green for the third day in a row. Crude settled at $72.54 a barrel, up 12 cents, or 0.17%. 

Data Dump

The Conference’s Boards’s index on Leading Economic Indicators rose in July by 0.6%, marking the fourth month of increases in a row -- the longest such stretch since 2004.

Corporate Movers

American International Group (AIG) saw its shares surge 21% after new CEO Robert Benmosche reportedly told employees he will sell the assets of the insurer at market prices and would not rush to liquidate them. In a tape recording acquired by Dow Jones, Benmosche said on Aug. 4 he will not bow to pressure from the government to sell assets to repay the billions in taxpayer loans received by the company to prevent collapse. 

Sears (SHLD) plunged 12% after the retailer disclosed a surprise adjusted-loss of 17 cents per share. The retailer’s revenue tumbled by a worse-than-expected 10.3% to $10.55 billion. 

Barnes & Noble (BKS) beat the Street with an adjusted-profit of 14 cents per share in the second quarter. Barnes & Noble said its revenue fell by a better-than-expected 5% to $1.2 billion. The bookseller’s same-store sales slid 6.9% during the period.

Ross Stores (ROST) reported an in-line 45% jump in second-quarter net income and again upgraded its full-year guidance amid expectations for a jump in sales. Thanks to a 2% rise in same-store sales, Ross said its quarterly revenue increased by 7.9% to $1.77 billion, barely beating expectations.

Southwest Airlines (LUV), which lost a bid to purchase bankrupt Frontier Airlines to Republic Airways (RJET) earlier this month, is still in the market for acquisitions, The Wall Street Journal reported. Southwest CEO Gary Kelly didn’t tell the paper which other airlines his company is interested in but said it would not be a large legacy carrier and would need to have a similar fleet of Boeing (BA) 737s.

Northrop Grumman (NOC) is shopping its advanced engineering and consulting division to a number of private equity firms and other companies, the Journal reported. Northrop, which is the No. 3 Pentagon contractor by sales, could receive about $1 billion for the unit, which is known as TASC and employs about 5,000 people, the paper reported.

Dick’s Sporting Goods (DKS) surged 7% after the retailer’s non-GAAP EPS of 36 cents topped estimates. Dick’s said its sales rose 3.7% to $1.13 billion, slightly exceeding expectations. The retailer also upgraded its full-year guidance above the Street’s view.

Goldman Sachs (GS) received Federal Reserve approval last week to become what’s legally known as a financial holding company, the bank said Thursday. The status allows Goldman to continue to conduct activities that a commercial bank wouldn’t normally conduct, such as private equity, but still be under the direct supervision of the Fed. 

Heinz (HNZ) weighed in with a better-than-expected 7% decline in second-quarter net income as the maker of ketchup and other staples benefited from foreign-exchange fluctuations and lower margins. The company also said its revenue tumbled by 4.5% to $2.47 billion.

GameStop (GME) disclosed a worse-than-expected 32% decline in net income as same-store sales plunged 14.1% and fewer desirable video games hit the shelves. The video game retailer also cut its 2009 and third-quarter earnings guidance below the Street’s view.

Global Markets

European markets closed solidly higher as the U.K.'s FTSE 100 gained 1.43% to a fresh 2009 high of 4756.58, France's CAC 40 rose 1.59% to 3505.32 and Germany's DAX advanced 1.51% to 5311.06. 

In Asia, Japan's Nikkei 225 rallied 1.76% to 10383.41, Hong Kong's Hang Seng soared 1.88% 20328.86 and China's Shanghai Composite surged 4.52% to 2911.58.