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Investors have been looking for any small sign that the economy isn't headed into another recession. Thursday, they got just that, sending stocks surging.
Fewer Americans joined the unemployment line last week and a technology bellwether bested analyst expectations. In Europe, leaders of France and Germany, the region's biggest economies, said they will meet next week to talk about how to solve Europe's financial difficulties.
The Dow Jones industrial average rose 290 points, or 2.7 percent, to 11,011 an hour after markets opened. The gain pulls the average further away from bear market territory: The Dow ended Wednesday at 16.3 percent below its high for the year, set on April 29. A drop of 20 percent would mean the bull market that began in March 2009 has turned into a bear, a long period of stock declines.
The number of people filing for unemployment benefits for the first time fell to 395,000 last week, down 7,000 from a week earlier. It's the first time that number has dropped below 400,000 in four months. Analysts said it may be a sign that the job market is slowly improving after its three-month slump. Job growth slowed to an average of 72,000 in May, June and July. In the previous three months, employers added 215,000 jobs per month, on average.
"It's the first scrap of economic data we've had recently that says the idea that we're going into another recession may be overdone," said Carlton Neel, who manages about $2 billion as a senior portfolio manager at Virtus Investment Partners.
He said investors are so scared of being the last one out of the market in a downturn or the last one in during a rally that they are stampeding in herds, creating more volatility.
"Fear tends to be a much more powerful emotion, and the sell-offs tend to be more violent than the rallies," he said. "But people are worried about missing the bottom, so you will have a few melt-ups along the way." That's because memories of the last meltdown in 2008 are still fresh in the mind of many investors.
The S&P 500 index rose 33, or 3 percent, to 1,154. The Nasdaq composite index rose 78, or 3.3 percent, to 2,460.
Investors had been growing more worried about the economy since the government said last month that it grew at its slowest pace in the first half of 2011 since the recession ended in 2009. Worries about the weak economy and the first-ever downgrade of the U.S. credit rating contributed to big swings in stocks this week.
Only 16 stocks in the S&P 500 index fell.
Technology stocks helped lead the U.S. market higher. Cisco Systems Inc. reported profit for its latest quarter that topped analysts' expectations. It is considered a bellwether for the tech industry because it is the world's largest maker of computer networking equipment. Cisco also said revenue may grow more quickly this quarter than analysts were anticipating. Cisco rose 16.7 percent for the biggest rise among stocks in the S&P 500. As a group, tech stocks in the S&P 500 rose 3.1 percent.
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