NEW YORK (CNN/Money) -
Stocks surged Thursday, with the Dow notching its best day in more than two years, as upbeat economic news and earnings reassured investors wary after the market's recent sell-off.
Whether the rally will continue Friday remains to be seen, with Nasdaq and S&P futures pointing to a pretty flat open, when fair value is taken into account. With no economic news on tap, the focus Friday will again be earnings, both those released after the bell Thursday -- including Google -- and those due in the morning.
The Dow Jones industrial average (up 206.24 to 10,218.60, Charts) jumped nearly 2.1 percent Thursday, its biggest one-session percentage gain since February 2003. In point terms, the rise of about 206 points was it best one-day gain since June 2003.
The broader Standard & Poor's 500 (up 22.45 to 1,159.95, Charts) index jumped 2 percent.
The tech-fueled Nasdaq composite (up 48.65 to 1,962.41, Charts) added around 2.5 percent, its biggest one-day percentage gain since March 2004.
The stock rally sent Treasury bond prices lower and yields higher, as investors plowed money from bonds into equities.
Thursday's rally was partly a bounce off of Wednesday, when blue-chips sank to yearly lows amid new worries about inflation, analysts said.
However, the gains Thursday also spoke to a sense of relief that economic and corporate growth looks to be on track, after solid earnings from UPS, Nokia and other firms, as well as upbeat readings on manufacturing and employment.
"Last week, we were worried about a sluggish economy, Wednesday it was back to inflation," said Art Hogan, chief market analyst at Jefferies & Co.
"It's going to continue to be a tug of war as to what gets our attention," he added. "But there's been more good news than bad news this week, (Federal Reserve Chairman) Alan Greenspan didn't throw any bombs this morning, and we lost more than 400 points on the Dow last week."
All of these factors contributed to Thursday's rally.
With some of the worries about the pace of the economy and interest rates cooled for the short term, the market can likely extend the advance at least for another few sessions, said Peter Cardillo, chief market analyst at S.W. Bach & Co.
However, longer term, concerns remain about and are likely to keep the market choppy, said John Forelli, portfolio manager at Independence Investments, as investors try to get a better sense of when the Fed is set to stop raising rates.
"We need some sort of clear indication from the Fed that the economy is not slowing down and that inflation is not out of control," Forelli added. "But it's not likely we are going to get that clarity in the next few months."
For more on the conundrum facing investors, click here.
After the close, influential Internet leader Google (up $6.12 to $204.22, Research) reported quarterly results that beat forecasts on an earnings and revenue basis, and grew from a year ago, sending shares sharply higher in after-hours trade.
Also after the close, SanDisk (up $0.91 to $27.88, Research), which makes computer memory cards, reported quarterly earnings that rose from a year ago and topped estimates, as well as gross profit margins that beat estimates.
However, shares slipped, perhaps due to the company's quarterly revenue, which rose from a year ago, but missed forecasts.
Among stocks moving on earnings, UPS (up $3.30 to $70.56, Research) rallied after reporting results that beat estimates.
Telecom gear makers rose after Motorola (up $1.00 to $15.93, Research) and Nokia (up $1.01 to $16.35, Research) issued strong quarterly earnings. Nokia also lifted its forecast for growth in the global mobile handset market in 2005.
Dow component Altria (up $2.56 to $65.31, Research) jumped 4 percent a day after reporting sales and earnings that rose from a year ago and topped forecasts. Additionally, the company's Philip Morris unit may be close to a deal with the Chinese government that would allow Marlboro cigarettes to be produced and sold in China, according to a Wall Street Journal report.
Dow stock Intel (up $0.70 to $23.36, Research) gained in a follow up to Tuesday's after-the-bell earnings. The semiconductor behemoth led a list of chip stocks making gains. The Philadelphia Semiconductor (up 10.75 to 394.72, Charts) index, or the SOX, rose 2.8 percent.
SAP (up $2.02 to $39.51, Research)'s higher than expected earnings and license revenue sales sent shares of the European business software maker higher.
The software sector overall was strong, with the Goldman Sachs Software (Charts) index adding 3 percent. Software leader Microsoft (up $2.02 to $39.51, Research) advanced 4 percent.
But Dow component McDonald's (down $0.09 to $29.85, Research) slipped after reporting higher quarterly earnings -- it was the one decliner on the Dow.
eBay (down $0.03 to $33.08, Research) also slipped despite reporting improved results late Wednesday. The online auctioneer reported quarterly earnings that increased from a year earlier and topped estimates on higher sales that were in line with estimates.
MBNA (down $3.83 to $19.28, Research) tumbled 16.5 percent in active New York Stock Exchange trading after reporting weaker first-quarter earnings and warning that 2005 earnings would miss forecasts. The credit card lender said the weakness stemmed from increased competition from banks offering lower rates on cards.
The day also brought a number of deals, which added to the bullish sentiment.
The New York Stock Exchange said it will buy electronic-trading firm Archipelago Holdings in a deal that will turn the 212-year old trading institution into a public company and help it compete in an increasingly electronic trading environment.
Additionally, Time Warner (up $0.60 to $17.53, Research) -- parent of CNN/Money -- and Comcast (up $0.76 to $32.25, Research) said they will buy bankrupt cable operator Adelphia Communications in a deal worth $17.6 billion. The joint bid beat out a rival offer from Cablevision (up $0.79 to $27.46, Research).
Market breadth was positive and volume was moderate. On the New York Stock Exchange, winners beat losers nearly three to one on volume of 1.45 billion shares. On the Nasdaq, advancers topped decliners by two to one on volume of 1.60 billion shares.
Jobless claims drop
The number of Americans filing new claims for unemployment last week slid to 296,000, the Labor Department said, noting it was just the second time claims have been below 300,000 since October 2000.
Also on the upside: the Philadelphia Fed Index, released at midday. The regional read on manufacturing conditions rose to 25.3 in April from 11.4 in March. Economists thought it would slip to 10.0.
The index of leading economic indicators, released shortly after the open, eased 0.4 percent in March, according to a separate report. That followed a rise of 0.1 percent in February and surpassed forecasts for a decline of 0.3 percent.
Investors seemed to take in stride comments from Alan Greenspan, who warned that rising U.S. deficits are pressuring the economy and boosting interest rates. The Fed chairman was speaking at a Senate Budget Committee hearing.
U.S. light crude oil for June delivery rose 17 cents to settle at $54.20 a barrel on the New York Mercantile Exchange.
Treasury prices slumped, raising the 10-year note yield to 4.30 percent from 4.19 percent late Wednesday. Bond prices and yields move in opposite directions.
In currency trading, the dollar advanced versus the euro and was little changed versus the yen.
COMEX gold lost $2.30 to settle at $434.40 an ounce.
In global trade, Asian-Pacific stocks ended mixed and European shares ended mostly lower.