Stocks surge, day 2

NEW YORK (CNNMoney.com) -- Stocks rallied Thursday afternoon, gaining for the second session in a row, as investors welcomed the White House's plan to help troubled homeowners and geared up for Friday's jobs report and next week's Fed policy meeting.

The Dow Jones industrial average (Charts) added 1.2 percent, according to early tallies. The broader S&P 500 (Charts) index gained 1.3 percent. The tech-fueled Nasdaq (Charts) composite climbed 1.4 percent.

Stocks had drifted higher during the session, but gains were limited as investors sorted through mixed retail news, including a warning from Target, and a report showing a big jump in the pace of foreclosures filed during the third quarter.

However, the advance found its second wind in the last hour of trade, as investors digested the Bush Administration's proposal to help out subprime lenders.

Treasury prices tumbled, raising the corresponding yields, as investors pulled money out of safe haven investments and put it into stocks. Oil and gold prices jumped.

Here's a look at what was moving near the close.

Stocks rallied Wednesday, with the Dow jumping nearly 200 points, on a mix of strong economic news and bets that the Federal Reserve will cut interest rates again at its policy meeting next week.

That sentiment continued to lift stocks Thursday as investors geared up for Friday's key monthly jobs report.

"Yesterday's rally was overdue and since we didn't have any really negative news today, other than maybe Target, we're seeing a continuation of that rally," said Joseph Saluzzi, co-head of equity trading at Themis Trading.

Also helping stocks higher were strong November sales results from many of the nation's discount retailers, although specialty clothing chains struggled, making for a mixed start to the critical holiday retail sales period.

Among the standouts, Wal-Mart (Charts, Fortune 500) reported sales at the high end of its guidance. Costco (Charts, Fortune 500) saw strong gains as well. Macy's (Charts, Fortune 500) and Nordstrom (Charts, Fortune 500) reported strong November sales, but warned that December sales will fall.

Target (Charts, Fortune 500) reported November sales and a December forecast that disappointed analysts, prompting a downgrade from Wachovia Capital Markets, AP reported.

Investors also considered the latest developments for the mortgage and credit market crisis, including a Mortgage Bankers Association report that the rate of homeowners going into foreclosure hit a record high in the third quarter.

The report was somewhat tempered the release of the White House's plan to aid troubled homeowners. The plan freezes the borrowing rate on certain subprime mortgages for five years and was negotiated between the Treasury Dept., mortgage lenders and banks. (Full story).

Countrywide Financial (Charts, Fortune 500), the largest mortgage lender in the country, gained nearly 14 percent following the expected announcement. A variety of homebuilders bounced too, including DR Horton (Charts, Fortune 500), Lennar (Charts, Fortune 500) and Centex (Charts, Fortune 500).

The homebuilder sector also got a lift from Toll Brothers (Charts, Fortune 500), which reported quarterly results. The luxury homebuilder reported its first ever quarterly loss. However, the loss was narrower than what analysts were expecting.

Shares of chipmaker Intel Corp (Charts, Fortune 500). rose more than 2 percent on an analyst note that said demand for notebook computer components appears "a bit stronger" than expected, according to the AP.

Other tech stocks like Apple Inc (Charts, Fortune 500) and Dell Inc (Charts, Fortune 500) gained as the tech-heavy Nasdaq rose.

Market breadth was positive. On the New York Stock Exchange, winners beat losers three to one on volume of 902 million shares. On the Nasdaq, advancers topped decliners by more than two to one as 1.44 billion shares changed hands.

Also in focus: the Bank of England opted to cut interest rates by a quarter-percentage point to 5.50 percent, providing some encouragement to U.S. investors ahead of next week's Fed meeting. The European Central Bank held rates steady.

U.S. central bankers meeting Tuesday are widely expected to cut the fed funds rate, a key short-term interest rate, by at least a quarter-percentage point and possibly as much as a half-percentage point. Federal Reserve Chairman Ben Bernanke and other Fed officials have hinted at as much in recent weeks, and the action in the bond market lately would suggest as much.

Treasury prices fell Thursday, boosting the yield on the 10-year to 4.01 percent from 3.94 percent late Wednesday. Treasury prices and yields move in opposite directions. A recent rally in Treasury prices has left the 10-year note yield now more than 50 basis points below the fed funds target rate of 4.50 percent. There are 100 basis points in one percentage point.

The number of Americans filing new claims for unemployment fell last week by more than expected. However, the report was overshadowed a bit ahead of Friday's bigger monthly report.

U.S. light crude oil for January delivery rose $2.74 to settle at $90.23 a barrel on the New York Mercantile Exchange.

In currency trading, the dollar gained versus the yen and fell versus the euro.

COMEX gold for February delivery rose $3.40 to settle at $807.10 an ounce.