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The markets soared on Thursday after a round of upbeat data and positive developments on the European sovereign debt crisis boosted confidence on Wall Street.
As of 10:00 a.m. ET, the Dow Jones Industrial Average gained 237 points, or 2.1%, to 11,252, the S&P 500 rose 21.2 points, or 1.8%, to 1,172 and the Nasdaq Composite climbed 34.3 points, or 1.4%, to 2,526.
Traders cheered a rare bout of relatively positive economic data on Thursday even while the underlying trend remains fairly negative.
Financial performed particularly well, with JPMorgan Chase (NYSE:JPM) and Bank of America (NYSE:BAC) leading the blue chips higher. Energy and industrial shares like Caterpillar (NYSE:CAT) and ExxonMobil (NYSE:XOM) also posted solid performance.
In a sign of easing tensions, volatility as tracked by the VIX plunged 6%, while the yield on the benchmark 10-year Treasury note rose to 2.02% from 1.98%.
The final reading of U.S. Gross Domestic Product showed the economy expanded at an annualized pace of 1.3% in the second quarter, better than the previous estimate of 1%, and slightly topping estimates of 1.2%. The economy has slowed down significantly amid continued weakness in many sectors. Food and energy prices have climbed considerably from last year, putting added strain on consumers. Additionally, a stalling labor market, and turmoil on Wall Street have weighed heavily on confidence, also pushing back demand.
Weekly jobless claims fell to 391,000 from 428,000 the prior week, much lower than the 420,000 economists forecast. First time claims for unemployment benefits have been hovering about the 400,000-level for weeks in yet another sign that the labor market is struggling to find its footing.
Indeed, an important caveat to the relatively positive weekly data is the the Labor Department says "“technical issues and seasonal adjustment volatility” and not economic factors led to the sudden downtick.
"While the market responded well to the initial claims print, the ... caveat shouldn't be ignored," Peter Bookvar, managing director at Miller Tabak + Co., wrote in a note to clients.
Still, other analysts struck a more upbeat tone: "These are factors that are always part of the normal seasonal adjustment process, and there is nothing in this statement to suggest that this week's decline is distorted," economists at Barclays Capital wrote in a research note.
Pending home sales fell 1.2% in August from July, well better than the 1.8% drop economists anticipated. On a year-to-year basis pending sales, which measures signed contracts, have leaped 7.7%.
Wall Street has been driven by headlines regarding Europe's sovereign debt crisis, which has raised the specter of a Greek default that could put the world's financial system, and the European Union, in peril. Indeed, worries that German Chancellor Angela Merkel may not be able to rally enough support to back additional rescue funds for Greece contributed to the steep selloff the markets sustained late Thursday.
However, Germany's lower house, called the Bundestag, approved new powers for the European Financial Stability Facility, Europe's rescue facility early on Thursday. The move by Europe's largest economic power helped to allay fears that political tensions would hamper relief efforts for Greece, that will likely need to default if it doesn't receive billions of euros in international aid.
Commodities markets across the board were the subject of intense selling Wednesday amid fears the slowing economy may paralyze demand for energy and materials. Indeed, copper a key industrial metal, plunged more than 5% to a 52-week low, while crude oil slid 3.8%. Precious metals like gold and silver fared slightly better.
Trading in futures markets was more tame on Thursday. Light, sweet crude rose $1.24, or 1.5%, to $82.45 a barrel. Wholesale RBOB gasoline fell less than a penny to $2.65 a gallon.
In metals, gold gained $12.90, or 0.79%, to $1,630 a troy ounce. Copper rose 1 cent, or 0.25%, to $3.25 a pound.
The euro jumped 0.8% against the U.S. dollar, while the greenback fell 0.62% against a basket of world currencies.
Advanced Micro Devices (NYSE:AMD) cut down its third-quarter revenue and gross margin forecast, sending shares sinking.
The Euro Stoxx 50 rose 1.9% to 2,218, the English FTSE 100 gained 0.33% to 5,235 and the German DAX climbed 1.5% to 5,662.
In Asia, the Japanese Nikkei 225 jumped 0.99% to 8,701 and the Chinese Hang Seng dipped 0.66% to 18,011.