Big rally on Wall Street
Stocks jump despite oil surge as investors welcome better-than-expected May retail sales, a drop in weekly jobless claims and the Verizon-Alltel merger.
NEW YORK (CNNMoney.com) -- Stocks spiked Thursday, with the Dow jumping 214 points, as investors embraced a surprise dip in weekly jobless claims, stronger-than-expected May retail sales and a merger in the telecom sector.
The Dow Jones industrial average (INDU) gained 1.7%. The broader Standard & Poor's 500 (SPX) index rose 2% and the Nasdaq composite (COMP) gained about 1.9%.
Friday brings the big monthly non-farm payrolls report, due out before the start of trade. Employers are expected to have cut 60,000 from their payrolls in May, after cutting 20,000 in April.
The unemployment rate, generated by a separate survey, is expected to have risen to 5.1% from 5.0% in April. Average hourly earnings, the report's inflation component, is expected to have risen 0.2%, after gaining 0.1% in the previous month.
The April reading on wholesale inventories is due out after the start of trade Friday.
Stocks rose modestly Thursday morning, but picked up the pace as the session wore on, thanks to the mix of economic and company news, and a typical bounce following several down sessions.
Bond prices slumped as investors pulled money from the safe-haven investment. Gas prices hit a new high, and oil prices jumped more than $5 to settle just below $128 a barrel.
The better-than-expected retail sales results from discounters such as Wal-Mart and Costco fueled Thursday's rally, said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams. However, he noted that the improved sales were a result of the economic stimulus checks being mailed out, rather than a bigger indication of the health of the consumer.
On the upside, "a lot of people thought consumers were going to have to hoard their checks because they have to pay their mortgage and $4 a gallon for gas," Rovelli said. "So I guess there is some reassurance that the consumer isn't dead, at least at the lower end of the retail picture."
Stocks were mixed Wednesday on reports that Moody's could lower the credit ratings of bond insurers Ambac and MBIA.
But the mood was upbeat enough Thursday that stocks showed little reaction when S&P went ahead and cut its financial strength ratings on the two companies.
Verizon buys Alltel: The Dow component said it's buying the rural wireless carrier from a private equity group for $28.1 billion in a deal that will create the largest U.S. wireless carrier. Verizon (VZ, Fortune 500) shares jumped 5.4%. (Full story).
Jobless claims drop: The number of Americans filing new claims for unemployment fell 18,000 last week to 357,000, versus forecasts for an unchanged reading. The report was a positive amid hopes that the economy can avoid a recession. However, the four-week moving average, seen as a more reliable indicator, rose to a more than four-year high.
Housing market fallout: A report from the Mortgage Bankers' Association showed that the number of homes in foreclosure surpassed 1 million in the first quarter, a record number. (Full story).
Chain-store sales: Wal-Mart, the world's largest retailer, reported higher-than-expected May sales at stores open a year or more, saying it felt the benefit of the first wave of economic stimulus checks having been mailed out. Wal-Mart (WMT, Fortune 500) shares gained more than 3.7%.
Costco (COST, Fortune 500) also benefited from the economic stimulus checks, with the warehouse club posting a bigger-than-expected rise in May sales. Shares rose 3.8% (Full story).
Other movers: Lehman Brothers (LEH, Fortune 500) shares gained 7.8%, after a Deutsche Bank note helped temper worries about the company's outlook.
Gains were broad based, with all but two of the Dow 30 issues rising, including Chevron (CVX, Fortune 500) and ExxonMobil (XOM, Fortune 500), which benefited from the pop in oil prices.
Continental (CAL, Fortune 500) said it would cut 3,000 jobs from its workforce of 45,000 and ground 67 planes, amid soaring fuel prices and the struggling economy. Shares gained 4.8% regardless. On Wednesday, United Airlines parent UAL Corp. (UAUA, Fortune 500) also announced it would cut jobs and ground planes.
Gas hits new record: The national average price for a gallon of regular unleaded gas rose to $3.989 from $3.983 the previous day, AAA reported. It was the 28th record in 29 days.
Oil prices rise: U.S. light crude oil for July delivery rose $5.49 - the biggest single-day price gain since record-keeping began in 1983 - to settle at $127.79 a barrel on the New York Mercantile Exchange, after having slid for the past few sessions. Because oil is near record levels, the gain is not close to being the biggest advance on a percentage basis.
Other markets: The dollar slipped versus the euro, after rising for the past few sessions. The dollar gained versus the yen.
Treasury prices fell, lifting the yield on the 10-year note to 4.05% from 3.97% late Wednesday. Bond prices and yields move in opposite directions.
COMEX gold for August delivery fell $8.30 to $875.50 an ounce. 
