Stocks rally on earnings hopes

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NEW YORK (CNNMoney.com) -- Stocks rallied Thursday, with the major indexes flirting with 2009 highs, after Dow component Alcoa posted better-than-expected earnings and a report showed an unexpected drop in jobless claims.

The Dow Jones industrial average (INDU) rose 61 points, or 0.6%. The S&P 500 (SPX) index gained 8 points, or 0.8%, and the Nasdaq composite (COMP) climbed 14 points, or 0.6%.

Stocks ended mixed Wednesday as the previous two-day rally lost steam. Dow component Alcoa (AA, Fortune 500)'s after-the-bell announcement helped revive investors Thursday, starting off the financial reporting period on a positive note.

Stocks steadily moved higher as the session wore on, with the Dow briefly posting triple-digit gains, as 21 of 30 components rose.

"I think the market is clearly moving on expectations of better-than-expected earnings," said Tom Hepner, financial adviser at Ruggie Wealth Management. "But I'm just not sure we're going to see that. There are still plenty of reasons to think that the market has gotten ahead of the recovery."

A weak dollar, along with rising oil and gold prices, gave a lift to dollar-sensitive multi-nationals such as Dow components 3M (MMM, Fortune 500), GE (GE, Fortune 500) and Johnson & Johnson (JNJ, Fortune 500). The oil rise lifted Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500) and other commodity names.

Gold closed at a record $1,056.30 an ounce and hit an electronic trading high of $1,062.70 during the day Thursday.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by nearly three to one on volume of 1.28 billion shares. On the Nasdaq, advancers topped decliners five to four on volume of 2.42 billion shares.

Results: Third-quarter S&P 500 earnings as a whole are expected to decline more than 20% from a year ago, with materials, energy and industrials leading the decline. That means S&P 500 earnings will have slumped for nine straight quarters, the longest streak since earnings tracker Thomson began calculating the numbers.

But separate from the big picture, Wall Streeters are looking to see if individual companies are starting to see any earnings growth, beyond the impact of cost-cutting. In the second quarter, more than 70% of companies reported results that topped estimates, due to reducing costs. But few market-moving companies reported sales growth or revenue that topped estimates.

Cost-cutting is expected to continue to drive results this quarter, but topline growth could be improving at least in some sectors, if Alcoa is an indication.

The aluminum maker reported quarterly earnings and revenue that dropped from a year ago, but handily beat estimates. Shares rallied in extended-hours trading and also gained 2% Thursday.

Economy: Around 521,000 Americans filed new claims for unemployment last week versus forecasts for 540,000, the Labor Department reported. The number was the lowest in more than 9 months. Around 554,000 Americans filed unemployment claims in the previous week.

Continuing claims, a measure of those who have been receiving benefits for a week or more, fell to 6.040 million from 6.112 million the previous week.

The Commerce Department said wholesale inventories fell 1.3% in August versus forecasts for a drop of 1%. Inventories fell 1.6% in the previous month.

World markets: Global markets rallied. In Europe, London's FTSE 100 gained 0.9%, while France's CAC 40 and Germany's DAX both gained 1.3%. Asian markets ended higher.

Currency and commodities: The dollar fell versus the euro and yen, extending its recent slide against a basket of currencies.

U.S. light crude oil for November delivery rose $2.12 to settle at $71.69 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $11.90 to settle at a record $1,056.30 an ounce, the third straight record high for the precious metal.

Bonds: Treasury prices tumbled, raising the yield on the 10-year note to 3.24% from 3.18% late Wednesday. Treasury prices and yields move in opposite directions.