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Wall Street extended its winning streak to four days after global central banks acted to buttress the European banking sector, easing worries that the region may find itself in another credit crunch.
The European Central Bank, along with the U.S. Federal Reserve and other major central banks, is going to roll out three new liquidity operations between October and December aimed at helping euro zone banks secure funding amid the regional sovereign debt crisis.
"This event is an attempt to prevent a run on some European banks in terms of funding, especially dollar based funding," Peter Boockvar, managing director at Miller Tabak + Co., wrote in a note to clients.
Lending between banks, key to supporting the financial system, has lessened considerably, according to various metrics, because of worries about the banks' exposure to sovereign debt. This move is a bid to ease those pressures.
French banking stocks, which had been hit particularly hard because of these worries soared on the news. Indeed, BNP Paribas, Societe Generale and Credit Agricole tacked on considerable gains on the news.
The U.S. financial sector led the charge on Wall Street as well, with companies like JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) soaring. However, the rally was broad, with all Dow components ending higher and 86% of volume on the New York Stock Exchange in advancing shares.
The euro also advanced markedly on the news, recently gaining 1.1% against the greenback. Meanwhile, the U.S. dollar sagged 0.6% against a basket of world currencies.
As equity markets have rallied, traders have fled safe-haven assets. Gold tumbled $45.10, or 2.5%, to $1,781 a troy ounce. The yield on the benchmark 10-year Treasury note jumped to 2.085%.
The American economy came squarely into focus on Thursday morning, as market participants received several important economic reports.
The labor market has been one of the weakest components of the broader economy as unemployment has remained stuck above 9%, and the jobs market essentially stalled last month. Creating employment in America has also become a major political flashpoint in Washington, with President Barack Obama unveiling a sweeping job-creation proposal last week.
New claims for unemployment benefits rose last week to 428,000 from 417,000 the week prior. Economists had expected a drop to 410,000. The number of individuals filing for first-time unemployment benefits has been hovering about the 400,000-level for weeks, which has added to worries about the jobs market:
Prices at the consumer level climbed 0.4% last month, a bigger gain than the 0.2% economists anticipated, according to the Labor Department's Consumer Price Index. Excluding the more volatile food and energy components, so-called core prices were up 0.2%, which was in line with expectations. Monetary policymakers watch the inflation situation closely, as expansionary policy such as the Federal Reserve has embarked on often increases the chances of boosting the rate of inflation.
"The acceleration in the core CPI will add fuel to the fire for Hawks on the FOMC that believe the Fed should be removing accommodation, rather than adding to it," economists at Nomura wrote in a research note.
Two regional manufacturing survey showed continued contraction in September. The closely-watched Philadelphia Federal Reserve's business conditions rose to -17.5 this month, from -30.7 last month, but slightly worse than the -15 economists were anticipating.
The New York Federal Reserve's gauge of manufacturing activity fell slightly to -8.8 this month from -7.7 in August -- a weaker reading than the -4 economists forecast. Readings below 0 point to contraction while those above 0 point to expansion.
The markets have been driven sharply higher and lower by developments on Europe's sovereign debt crisis in recent days. Indeed, the blue chips traded in a nearly 400-point range on Wednesday as traders reacted to a constant flow of headlines. However, hopes that Europe would be able to keep the crisis under control pushed the Dow higher by 141 points by the end of the trading session.
On the corporate front, UBS (NYSE:UBS) said a rogue trader will cost the company $2 billion, resulting from unauthorized trades. Shares of the Swiss banking giant were down sharply in pre-market trading.
Former Morgan Stanley (NYSE:MS) chief executive John Mack also said he will step down as chairman at the end of the year but remain a senior advisor.
Energy markets were in the green tracking a much weaker dollar and hopes Greece will be able to avert a default on its debt. Light, sweet crude climbed 49 cents, or 0.55%, to $89.40 a barrel. Wholesale RBOB gasoline rose 6 cents, or 2.1%, to $2.78 a gallon.
The English FTSE 100 jumped 2.1% to 5,338 and the German DAX soared 3.2% to 5,508.
In Asia, the Japanese Nikkei 225 gained 1.8% to 8,669 and the Chinese Hang Seng rose 0.71% to 19,182.