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Wall Street zipped higher on the heels of the worst selling frenzy in months as traders reacted to upbeat corporate news, encouraging economic data and kept close tabs on Europe.
The Dow Jones Industrial Average jumped 113 points, or 0.96%, to 11,894, the S&P 500 gained 10.6 points, or 0.86%, to 1,240 and the Nasdaq Composite rose 3.5 points, or 0.13%, to 2,625.
Networking giant Cisco (NASDAQ:CSCO) performed the best out of the blue chips on Thursday after posting earnings that topped Wall Street's view on the top and bottom line after the closing bell on Wednesday. Merck (NYSE:MRK), also a Dow component, boosted its dividend by 11%, sending its shares soaring, and knocked fellow pharmaceutical titan Pfizer (NYSE:PFE) well into the green as well.
Overall, energy and heath care issues fared the best by far, while utilities and financials lagged behind. Volume on the Big Board has remained close to average levels over the past two days, indicating many market participants may be staying on the sidelines.
In what was a stark contrast from the powerful selloff Wednesday that knocked the S&P 500 and Nasdaq into the red for the year, volatility fell by more than 8%, while the yield on U.S. government debt edged higher in calmer trading. The 10-year Treasury note yields 2.056% from 1.997%.
Jobs, Trade Data Top Expectations
Traders finally had a round of economic data to parse through after three very light days earlier in the week.
New claims for unemployment benefits fell to 390,000 last week, the lowest level since April, from 400,000 the week prior. Economists have been focused strongly on the labor market, which has been slow to recover from the recession, and has become a major political issue.
The U.S. trade deficit narrowed substantially to $43.1 billion in September from $44.92 billion in August, and smaller than the $46 billion economists expected. Exports jumped 1.4%, while imports only edged up by 0.3%.
"This report is reassuring from that standpoint that even if some export demand to the euro area declines, increasing demand for US goods in Asia can support continued export growth," Troy Davig, an economist at Barclays Capital, wrote in a note to clients.
The difference between exports and imports figures directly into broader measures of economic output.
'Question Marks Abound' for Europe
Headlines from Europe have been a major driver of sentiment for the past several sessions, and still contributed to swings on Thursday.
Italy -- one of the world's biggest economies -- is in the throes the European debt crisis, having seen its borrowing costs surge to unsustainable levels, igniting fears that it will lose access to financing in the private market. If that were to happen, the country that has $2.6 trillion in public debt would need international support and risk defaulting, which analysts fear could rock the global financial system.
The country's parliament pushed a key vote on several economic reforms to this weekend, which was seen as a positive by market participants. European leaders have strongly pressured the country to take on reforms to cut its public debt down. Additionally, Prime Minister Silvio Berlusconi agreed to step down after the vote, paving the way for a new leader to push the reforms. Italy's President, Giorgio Napolitano, took steps to boost the standing of Mario Monti, a well-respected economist that may be tapped to lead the emergency government there.
Italy also auctioned 1-year notes Thursday morning. The auction was seen by strong as analysts, but the country was forced to pay a steep rate of 6.087%. The European Central Bank also bought Italian bonds in a bid to keep yields down, according to reports.
Still, market participants have struck a cautious tone: "Political uncertainty in Italy prevails as question marks abound around the budget," analysts at Nomura wrote in a note to clients.
Also on the European front, Greece chose former European Central Bank vice-president Lucas Papademos as the leader of the new government formed after Prime Minister George Papandreou agreed to step down over the weekend.
European blue chips rose 0.25%, while the euro climbed 0.39% to $1.360.
Energy markets were mixed. The benchmark New York oil contract gained $2.04, or 2.1%, to $97.78 a barrel. Wholesale RBOB gasoline slumped 1 cent, or 0.28%, to $2.64 a gallon.
In metals, gold sunk $32.00, or 1.8%, to $1,760 a troy ounce.
European blue chips rose 0.25%, the English FTSE 100 slipped 0.28% to 5,445 and the German DAX gained 0.66% to 5,868.
In Asia, the Japanese Nikkei 225 plummeted 2.9% to 8,501 and the Chinese Hang Seng plunged 5.3% to 18,964.