NEW YORK (CNNfn) - U.S. stocks rallied Thursday as investors bet the bulk of the corporate earnings warnings that hammered Wall Street this month are over.
The Dow Jones industrial average, Nasdaq composite index and S&P 500 index ended higher for the first time this week. The gains come one day ahead of the last trading session of September, a period when all the major indexes tumbled.
"I think people are getting ready for a fourth-quarter rally," Thomas Galvin, chief investment strategist at Donaldson, Lufkin & Jenrette, told CNN's Street Sweep. "All this selling pressure we've seen has built up a lot of cash on the sidelines which is being put to work."
The day's gainers read like a list of September's losers. Hewlett-Packard, off 13 percent this month, rose. And Procter & Gamble, one of the Dow's worst-performing stocks this year, also drew buyers after the company said earnings forecasts are on track. Intel, which this week fell to its lowest level since February, inched higher.
 In another volatile trading session, stocks swung wildly at the market this morning as investors digested a blitz of merger news, brokerage comments and economic indicators.
Friday's end of the third quarter, when portfolio managers often make massive changes to their baskets of stocks, added to the volatility.
By day's end, the Dow surged 195.70 points, or 1.8 percent, to 10,824.06, its first gain in three days. The Nasdaq rallied 121.96, or 3.3 percent, to 3,778.26, breaking a five-day losing streak.
The S&P 500 advanced 31.72, or 2.2 percent, to 1,458.29, its first rise in six sessions.
"It's about time," Art Hogan, chief investment strategist at Jefferies & Co. told Street Sweep. "It seems like we've been down for the entire month of September.
The Nasdaq is down 10 percent on the month while the Dow is off 4 percent in the period. Hogan sees Thursday's gains continuing Friday.
 More stocks rose than fell amid heavy trading volume. Advancing issues on the New York Stock Exchange topped declining ones 1,884 to 958 on volume of 1.1 billion shares. Nasdaq winners topped losers 2,590 to 1,393 as more than 1.9 billion shares changed hands.
In other markets, Treasury securities rose. The dollar climbed against the yen and euro.
Stocks seek bottom
Stocks rose broadly across many sectors Thursday. Lifting the Dow, Procter & Gamble (PG: Research, Estimates), off 30 percent over the last six months, jumped $5.19 to $66.94. The maker of Tide, Crest and Pringles said sales and earnings growth forecasts are on track, a sharp contrast for a company that twice this year readied analysts for shortfalls.
And Hewlett-Packard (HWP: Research, Estimates) -- which began the month at $120 -- headed higher, rising $3.38 to $106.88.
 The Dow's gains were nearly all-encompassing, with only six of the 30 blue chip components falling. Minnesota Mining & Manufacturing (MMM: Research, Estimates) rose $1.63 to $91.56, J.P. Morgan (JPM: Research, Estimates) advanced $5.25 to $166.44 and Disney (DIS: Research, Estimates) gained $1.25 to $38.31.
"Obviously we're getting to the point where everyone would have to agree that, on a short-term basis, the market is overdone on the downside," said Charles Payne, head analyst at Wall Street Strategies.
Even with the gains, the major indexes still are down for the year. And Payne said it's too early to say the worst is over.
The effects of the weak euro and high oil prices on earnings still are unclear. Questions regarding which party will capture the White House add to the confusion, Payne said.
And the earnings warnings didn't end Thursday. Among the most devastating, shares of World Wrestling Federation Entertainment (WWFE: Research, Estimates) plunged $4.25 to $15.50 after saying revenue would be 3 percent lower than forecasts for the remainder of its fiscal year.
And Eastman Kodak (EK: Research, Estimates) continued to fall, losing $1.43 to $41.25, two days after the company warned it will miss third-quarter profit targets. The announcement shaved 22 percent off the stock's value Tuesday, the day the warning was issued.
Lifting the Nasdaq, Worldcom (WCOM: Research, Estimates) gained $2.94 to $29.
Another gainer was Global Crossing (GBLX: Research, Estimates), which surged $2 to $31.88 after announcing that Exodus Communications is buying GlobalCenter, its Web hosting unit, for $6.53 billion. Exodus (EXDS: Research, Estimates) shed $4.13 to $49.13.
And Royal Bank of Canada agreed Thursday to acquire the brokerage firm Dain Rauscher for $1.46 billion in cash, the latest merger in the quickly consolidating financial services industry. Dain Rauscher (DRC: Research, Estimates) jumped $13 to $92.88. Royal Bank (RY: Research, Estimates) shaved off $1.13 to $60.13.
The day's gains are an anomaly in September, when stocks fell amid concerns the economy will slow in the months ahead. Wall Street has slashed billions of dollars of market value from the nation's companies in recent weeks in an attempt to revalue stocks amid a cooling economy.
 Still, the latest economic indicator showed strength. The nation's economy grew 5.6 percent in the second quarter, the Commerce Department said in its final revision of gross domestic product. And the GDP chain deflator, a closely watched inflation indicator, was revised down to a 2.4 percent increase during the period.
But the market is forward-looking and paid little attention to the old data. Ahead, analysts expect the economy's annual growth rate to slow to about 3 percent, far lower than in past quarters.
Still, Robert Stovall, market strategist for Prudential Securities, told CNNfn's In the Money that the fourth quarter, which begins Monday, offers the promise of a broad advance. (361K WAV) (361K AIFF) 
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