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The markets lurched deep into positive territory on a report that global central banks are preparing to take action to prevent market contagion if needed after the Greek election.
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As of 3:42 p.m. ET, the Dow Jones Industrial Average rose 152 points, or 1.2%, to 12646, the S&P 500 climbed 13.4 points, or 1%, to 1328 and the Nasdaq Composite gained 16.2 points, or 0.59%, to 2835.
The markets have been fixated on Europe in recent sessions with the Greek election now taking place in days.
The most recent development to capture Wall Street's attention was a report from Reuters that global central banks are preparing to take action to prevent contagion from spreading through financial markets following the Greek elections if it becomes necessary. The report cited unnamed G20 sources. There have been fears for months that if Greece leaves the euro, which is a possible outcome of the elections, it will send shockwaves through already ailing European financial markets. In fact, Egan-Jones Ratings sliced France's credit rating to BBB+ from A-, citing concerns that Europe's No. 2 economy could see its borrowing costs rise.
Traders have shifted their focus to Spain and Italy, seen as the next potential victims of the debt crisis. Spain saw its 10-year bond yield soar to a euro-era record high at 7% on the back of downgrades from Moody's Investor Service and Egan-Jones on Wednesday. The cost to insure the country's debt is also hovering about a record high, according to financial data company Markit.
Meanwhile, Italy was forced to pay 5.3% to borrow for three years at a bond auction Thursday, considerably higher than the 3.9% it paid a month ago. Still, Rome was able to sell its maximum allotment of $5.7 billion worth of the three-year and two other types of bonds on relatively strong demand.
The Euro Stoxx 50, which tracks eurozone blue chips, rose 0.22%.
Wall Street also received fresh data on the U.S. economy.
New claims for unemployment benefits rose to 386,000 last week from an upwardly revised 380,000 the week prior. Economists had been expecting claims to fall to 375,000 from a previously reported 377,000. The labor market has shown signs of weakness in recent months, with job creation slowing down considerably.
Inflation at the consumer level cooled down by 0.3% in May from April, led by plummeting energy prices, the Labor Department reported. It was the biggest drop since December 2008 and deeper than the 0.2% that was expected. Excluding the food and energy components, core prices were up 0.2%, which matched economists' expectations. The headline reading was up 1.7% from the same month last year, while the core prices have jumped 2.3%.
Analysts are paying especially close attention to these data since the Federal Reserve needs to balance the risk of inflation against the risk of economic headwinds when it makes its policy decision at its two-day meeting next week.
Oil prices were steady as traders awaited the outcome of a meeting of the Organization of Petroleum Exporting Countries. Traders will be looking to see if the powerful cartel will change its production cap from 30 million barrels per day that was decided upon last December.
The benchmark crude oil contract traded in New York rose 21 cents, or 0.25%, to $82.82 a barrel. Wholesale New York Harbor gasoline fell 0.25% to $2.65 a gallon.
In metals, gold edged up by $2.90, or 0.18%, $1,622 a troy ounce.
The Euro Stoxx 50 rose 0.22% to 2148, the English FTSE 100 dipped 0.31% to 5467 and the German DAX slumped 0.23% to 6139.
In Asia, the Japanese Nikkei 225 slipped 0.22% to 8569 and the Chinese Hang Seng sold off by 1.2% to 8808.