Stocks surged back into positive territory on Thursday even after new signs of economic pain threatened to drive the markets to their lowest levels in 5-1/2 years. 

The huge gains carried Wall Street to its first winning session of the week and came on the day that the Dow swung in an incredibly wide range of roughly 900 points. 

Today's Market

The Dow Jones Industrial Average jumped 552.59 points, or 6.67%, to 8835.25, the broader S&P 500 added 58.99 points, or 6.92%, to 911.29 and the Nasdaq Composite picked up 97.49 points, or 6.50%, to 1596.70. The consumer-friendly FOX 50 rose 41.98 points, or 6.44%, to 694.14.

By the time the dust settled the Dow had ended with its third biggest point gain in history (the other two were also in 2008) and its 22nd largest percentage gain ever. The 911.2 point swing on the benchmark U.S. index ranks as the third largest since records began in 1995. 

“It kind of fed on itself as the buyers kept buying stocks, the sellers just walked away. These are the kinds of moves you have in bear markets. They can happen on little news," said Michael James, senior equity trader at Wedbush Morgan Securities. “It’s certainly nice that we’ve rallied this much but nothing fundamentally has changed.”

Market participants explained the dizzying moves by pointing to the fact the Dow and S&P 500 both successfully "re-tested" their 2008 lows on Thursday. While the S&P 500 briefly slipped below its lowest levels of the current crisis, the Dow flirted with its low before surging 900 points above it. 

“I think it’s a very bullish sign," said Art Hogan, chief market strategist at Jefferies & Co., pointing to the day's encouragingly high trading volume. "Unfortunately we still have a lot to get through. We have an employment situation that will get worse before it gets better. But I think we have gotten to a point where we have priced in a lot of bad news.”

Nearly all 30 stocks on the Dow ended the day sharply higher, led by double-digit percentage gains from Caterpillar (CAT), Home Depot (HD) and Chevron (CVX). Those enormous gains overshadowed another round of losses from Citigroup (C) and General Motors (GM), which pared their losses but still closed lower. 

The day's turbulence was highlighted by the financial sector as Bank of America (BAC), General Electric (GE), Citi and Goldman Sachs (GS) all recovered after plunging to fresh 52-week lows.

“This was a successful re-test. I believe we are on the cusp of a pretty good bear-market rally. Today was the first step toward that," said Peter Boockvar equity strategist at Miller Tabak. “I don’t think the worst is over. I think the market will have a multi-month respite.”

There was no clear-cut catalyst for the market's surge, though Boockvar pointed to a sharply weaker dollar which helped send commodities like crude oil to big gains. 

“The key to a rally is not going to be the economy all of a sudden getting better. It’s going to be the action in the dollar," said Boockvar. 

The markets also breathed a sigh of relief after the government released the results of a six-month Treasury sale that showed healthy demand for the securities. 

Thursday's massive gains came in the face of a number of bearish factors, including new pessimistic guidance from chip maker Intel (INTC) and retail king Wal-Mart (WMT). 

The markets were also able to shrug off the latest ugly economic data as the government reported an unexpected spike in initial jobless claims, which jumped by 32,000 to 516,000 -- the highest level since September 2001. Continuing claims, which are filed by individuals unemployed for more than one week, jumped by 65,000 to 3.9 million, the highest level since January 1983.

The latest unemployment data serves as a reminder of the precarious state of the U.S. labor market, which economists expect to only worsen in the months to come as growth contracts further. 

Meanwhile, crude oil prices mirrored the volatility in the equities markets, spiking above $58 a barrel despite new data showing weak demand. Crude ended up $2.08 at $58.24 a barrel after plunging below $55 in earlier trading. 

Thursday's jump in oil prices represents a rebound from two days of steep losses that sent crude to levels unseen since January 2007. The energy market shrugged off a new warning from the International Energy Agency that world oil demand growth could fall into negative territory this year for the first time in 25 years. 

Corporate Movers

Citigroup (C) briefly fell to 12-year lows on Thursday after The Wall Street Journal reported the bank's board of directors is considering replacing Sir Win Bischoff as chairman with Richard Parsons, the chairman of Time Warner (TWX). However, Citi's board issued a statement, saying the report is "completely erroneous" and Bischoff has "its full support"

Wal-Mart (WMT), the only Dow component up year-to-date, posted a better-than-expected quarterly adjusted-profit of 80 cents per share Thursday morning. However, Wal-Mart issued a fourth-quarter and full-year profit guidance that was below analyst estimates. 

Intel (INTC) hit 52-week lows before recovering after the chip giant predicted fourth-quarter revenue of $9 billion, well below its earlier forecast of $10.1 billion to $10.9 billion. Intel cited "significantly weaker" demand for its microchips across the board and said customers are "aggressively" slashing orders due to slumping sales. 

General Electric (GE) said its plans to pay a dividend through the end of 2009 are "unchanged" despite the turmoil in the credit markets. The statement came after fears of a dividend cut helped send shares of GE to a fresh all-time low on Thursday. 

Chrysler LLC CEO Bob Nardelli said he "totally supports" the need for a U.S. government cash infusion into the auto industry, according to Reuters. The Chrysler exec also said the auto maker is operating below the break-even level because of the sales and production slump, the wire service reported. 

CIT Group (CIT) soared double-digit percentages after the commercial finance company applied to become a bank holding company to gain access to the government's rescue funds. Quarterly revenue plunged 32% to $174.2 million, missing analyst estimates. 

Crocs (CROX) lost almost half of its market value a day after the footwear company reported a stunning adjusted-loss of 53 cents per share. Analysts had expected a profit of 2 cents per share.  

Sprint Nextel (S) saw its shares surge after announcing voluntary buyout offers to an unspecified number of workers. The stock has lost more than 40% of its value at hit all-time lows since announcing a quarterly loss last week. 

Franklin Bank (FBTX), the bank founded by mortgage-backed securities pioneer Lewis Ranieri, filed for bankruptcy protection and plans to liquidate just days after it was seized by the FDIC. The Texas bank becomes the third-largest U.S. bank to fail in 2008.

Data Dump

Thanks to the plunging price of crude oil, the government said Thursday the U.S. trade deficit fell 4.4% to $56.5 billion in September, tumbling to the lowest level in nearly a year.

World Markets

Asian markets plunged overnight while their European counterparts closed narrowly mixed.

The Dow Jones Euro Stoxx 50 closed up 29.20 points, or 1.22%, to 2429.94 while London’s FTSE 100 Index slumped 12.81 points, or 0.31%, to 4169.21.

In Asia, Japan’s Nikkei 225 plunged 456.87 points, or 5.25%, to 8238.64 and Hong Kong’s Hang Seng Index lost 717.74 points, or 5.15%, to 13221.35