NEW YORK (CNN/Money) - Wall St. rebounded Thursday with a strong post-Enron rally led by techs and blue chips, as investors increasingly gained confidence from some encouraging economic data about the corporate outlook.
"The techs on balance have put in a fairly decent performance," said Joseph Battipaglia, chief investment strategist with Gruntal & Co. "We're getting a sense that there's a bottoming going on in the semiconductors. Some of the bellwether companies like Cisco are talking about a better environment in the future."
Investors digested a mixed batch of economic reports that appeared to take the edge off growing anxiety about the timing of a U.S. recovery that led to two days of stock losses.
"The positive tone has more to do with the economic data that showed some signs of life in the economy. We've got through the Enron debacle and some selling that represented investors looking to lock in profits earlier on," Battipaglia added. "Now we're starting to get a serious picture of what next year looks like, and it's probably the first serious step toward an upward move in the market."
Initial claims for unemployment benefits rose more than expected to 488,000 last week from a revised 434,000 a week earlier, according to the Labor Department. But October durable goods orders surged 12.8 percent, the biggest increase since 1992, and new home sales rose to a better-than-expected annual rate of 880,000 in October.
But market watchers point out that investors are also factoring in the possibility of another Federal Reserve interest rate cut hinted at by Federal Reserve Governor Laurence Meyer on Tuesday.
"There's still general nervousness around. The major event of the week has been comments from various Fed heads, and they seem to be saying not only that the economy has not begun to perk up but that there are still some signs that it is slowing down," said Arthur Cashin, director of floor trading at UBS PaineWebber.
The Dow Jones industrial average rose 117.56, or 1.2 percent, to 9,829.42, while the tech-heavy Nasdaq composite gained 45.29, or 2.4 percent, to 1,933.26.
In the broader market, the Standard & Poor's 500 index gained 11.68, or 1 percent, to close at 1,140.20.
Market breadth was positive. On the New York Stock Exchange, advancers edged decliners 5-to-3 as 1.35 billion shares traded. On the Nasdaq, winners stayed ahead of losers 2-to-1 as 1.92 billion shares changed hands.
U.S. Treasury prices staged a rally, with the yield on the 10-year note falling to 4.76 percent from 4.95 percent late Wednesday.
In the currency market, the dollar gained against the yen but was mostly flat versus the euro. Light crude oil futures lost 60 cents to $18.62 a barrel in New York.
Enron rundown
Questions swirled around whether Enron will file for bankruptcy protection a day after two after credit rating agencies downgraded the energy trading company's debt to "junk" status, causing the collapse of the proposed merger with Dynegy (DYN: down $2.24 to $33.65, Research, Estimates). Enron shares lost more than 85 percent of their value Wednesday on heavy volume that broke the one-day record on the New York Stock Exchange.
"The reason why Enron's on the verge of bankruptcy is not related to the merger. Enron has a significant liquidity problem," Andre Meade, energy analyst with Commerzbank, told CNNfn's CNN Money Morning. "But the impact from the collapse will be widespread. Clearly banks and other trading companies that were owed money from Enron will get cents to the dollar."
Financial stocks with exposure in the company showed resiliency. JP Morgan Chase (JPM: up $0.56 to $38.06, Research, Estimates) and Citibank (C: up $0.56 to $48.36, Research, Estimates), two companies with investments in the energy trader, were close to breakeven after sharp losses Wednesday.
Bank of America (BAC: up $1.89 to $63.60, Research, Estimates), Goldman Sachs (GS: up $2.54 to $89.35, Research, Estimates) and Morgan Stanley (MWD: up $2.05 to $56.25, Research, Estimates) rebounded from Wednesday's selloff.
Fallout from the Enron news affected some stocks in the energy sector, with Denbury Resources (DNR: down $0.32 to $6.45, Research, Estimates) lower, but American Electric Power (AEP: up $0.14 to $40.58, Research, Estimates), El Paso (EPG: down $0.25 to $44.66, Research, Estimates), Mirant (MIR: up $2.00 to $25.40, Research, Estimates), Calpine (CPN: up $1.28 to $22.38, Research, Estimates) and Burlington Resources (BR: up $0.84 to $35.36, Research, Estimates) edging higher.
Tugging on the Dow was component Johnson & Johnson (JNJ: down $1.51 to $58.48, Research, Estimates), which suffered after Morgan Stanley downgraded the health care products maker to "neutral" from "outperform."
H&R Block (HRB: up $4.34 to $40.34, Research, Estimates), the No. 1 U.S. tax preparer, rose after it raised profit forecasts for the current fiscal year as its second-quarter loss narrowed, helped by new accounting rules and strong mortgage business performance.
Techs build strength
Data storage networker Brocade Communications (BRCD: up $2.88 to $31.70, Research, Estimates) posted a fourth-quarter operating profit of 5 cents a share, below the 11 cents it earned a year earlier but a penny above analysts' estimates. Goldman Sachs upgraded the company to "recommend" from "market outperform."
Other names in the storage sector that trended higher were EMC (EMC: up $0.41 to $17.10, Research, Estimates) and Network Appliance (NTAP: up $0.83 to $15.50, Research, Estimates).
Chipmaker Altera (ALTR: up $1.64 to $23.47, Research, Estimates) on Wednesday reaffirmed its financial guidance that current-quarter sales would fall as much as 10 percent from third-quarter levels.
Among the chip stocks adding value were Xilinx (XLNX: up $1.85 to $36.30, Research, Estimates), Maxim Integrated (MXIM: up $3.15 to $54.46, Research, Estimates), and QLogic (QLGC: up $3.48 to $49.85, Research, Estimates).
Shares of nVidia (NVDA: up $2.25 to $53.61, Research, Estimates) jumped 6 percent after Standard & Poor's said the company will replace Enron on the S&P 500.
E-sourcing software developer FreeMarkets (FMKT: up $4.59 to $18.18, Research, Estimates) raised its revenue and profit outlook for the fourth quarter after several large customers renewed long-term contracts.
Shares of Acambis (ACAM: up $7.30 to $45.00, Research, Estimates) surged after the London-based biotechnology firm announced a $428 million deal to supply the U.S. government with smallpox vaccine. Baxter International (BAX: up $1.69 to $51.85, Research, Estimates) gained on the news after Acambis said it will subcontract the manufacturing of the vaccines to the U.S. company.
A Deutsche Banc Alex Brown upgrade on four airline stocks to "strong buy" from "buy" lifted the stocks of AMR (AMR: up $0.63 to $21.05, Research, Estimates), Delta Air Lines (DAL: up $1.04 to $27.94, Research, Estimates), Northwest Airlines (NWAC: up $0.37 to $17.23, Research, Estimates), and Alaska Air Group (ALK: up $1.52 to $29.10, Research, Estimates).
"We think that the picture is likely to brighten for airline stocks in the upcoming months," analyst Susan Donofrio said in a research note, citing lower fuel prices.
Continental Airlines (CAL: up $1.09 to $22.79, Research, Estimates) was upgraded to "strong buy" from "market perform. 
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