Stocks stage advance

Hot Stocks

• What's moving the markets
• Dow 30
• Latest market news

Quick Vote

When do you plan to retire?

• Before age 65
• At age 65
• After 65
• Never

or View results

Obama's Money Moves

200 days in, the President is going for broke. Click for analysis of where he's succeeding - and where he’s not.

View interactive

NEW YORK (CNNMoney.com) -- Stocks rallied Thursday, with financial and technology shares spearheading the advance as a report showing surprise growth in the manufacturing sector and gains in overseas markets propelled Wall Street.

The Dow Jones industrial average (INDU) climbed 71 points, or 0.8%. The S&P 500 (SPX) index added 11 points, or 1.1%. The Nasdaq composite (COMP) rose 20 points, or 1%.

A worse-than-expected jobless claims report unnerved investors in the early going, but the surprise rise in manufacturing reversed any losses, giving the market support for the rest of the session.

Financial shares were buoyant, with the KBW Bank (BKX) index gaining 2.9%. Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) were among the stocks boosting the index.

AIG (AIG, Fortune 500) rallied 21% after the insurer's new CEO said he expects the company to pay back the billions in loans it has taken to stay afloat.

Stocks managed to advance Wednesday, in the middle of a choppy week on Wall Street. After topping out at fresh 2009 highs last week, investors have struggled to push stocks higher this week. Between the March 9 lows and last week, the S&P 500 rallied 50%.

But bets that the economy is stabilizing have been undercut lately by worries about the jobs market and its impact on the already hard-hit consumer.

"A lot of what we've seen over the last five or six weeks has been the result of investor anxiety about not having jumped in ahead of the upturn," said Tom Hepner, vice president and financial advisor for Ruggie Wealth Management. "But I think the market, on an S&P 500 earnings basis, is ahead of itself."

He said that absent a big rise in revenue growth in the second half of the year --which doesn't seem to be brewing -- the market is wildly overvalued relative to corporate profit forecasts.

Stocks are likely to "crab sideways" over the next few weeks, before suffering a setback in the fall, he said.

Friday brings reports on July existing home sales and July state-by-state employment. Also, Federal Reserve Chairman Ben Bernanke will speak at the Kansas City Fed's economic symposium in Jackson Hole, Wyo., starting at 10 a.m. ET. His talk is expected to be about the past year in crisis for the financial markets.

Economy: The day brought a mix of economic news, including reports on manufacturing and the labor market.

The Philadelphia Fed index, a regional reading on manufacturing, climbed to plus 4.2 in August from negative 7.5 in July. Economists expected it to improve to negative 2. Any reading that is positive implies expansion in the sector.

Also on the upside, the Conference Board said its index of leading economic indicators (LEI) rose 0.6% in July after rising a revised 0.8% in June. LEI was expected to have risen 0.7%.

But the number of Americans filing new claims for unemployment rose last week versus forecasts for a drop. The Department of Labor reported 576,000 new claims last week from a revised 561,000 in the previous week. Forecasts were for claims to drop to 550,000, according to a Briefing.com survey of economists.

A report from the Mortgage Bankers Association said 13% of Americans are either late on their mortgage payments or in foreclosure, a record-high number.

World markets: Asian markets rebounded Thursday, reassuring investors after a plunge in China's main market Wednesday. The Chinese market has lost about 20% over the last two weeks, raising worries about China's economy. China is a big buyer of American and European products.

European markets rallied.

Oil: U.S. light crude oil for September delivery fell 89 cents to settle at $72.94 a barrel on the New York Mercantile Exchange, after rising nearly 5% Wednesday.

Bonds: Treasury prices gained, lowering the yield on the benchmark 10-year note to 3.42% from 3.45% Wednesday. Treasury prices and yields move in opposite directions.

Other markets: COMEX gold for December delivery fell $2.10 to settle at $942.70 an ounce.

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

Market breadth was positive. On the New York Stock Exchange, winners beat losers seven to three on volume of 1.05 billion shares. On the Nasdaq, advancers topped decliners eight to five on 2 billion shares.