NEW YORK (Reuters) - U.S. stocks rose on Thursday, with the Dow swinging nearly 200 points from its session low to high and the S&P 500 recovering after hitting a key technical level in volatile trading a day before the release of the U.S. jobs report.
Market volatility has increased recently and the S&P 500 has lost 3 percent since Federal Reserve Chairman Ben Bernanke's comments two weeks ago that the central bank may decide to reduce stimulus in the next few policy meetings if data shows the economy is improving. The move follows a rally for much of this year, largely on the Fed's continued stimulus actions.
The three major U.S. stock indexes finished Thursday's choppy session at their highs for the day.
Around midday, the S&P 500 briefly slipped below its 50-day moving average of 1,604 - the first time the benchmark has dropped below that technical level since April 18. By mid-afternoon, the S&P reversed course and ended the day up 0.9 percent. The session's best performers included financials .SPSY and health care .SPXHC, with each of those S&P sector indexes ending up 1.4 percent.
Economists expect the non-farm payrolls report on Friday will show job growth of 170,000 in May, slightly above April's addition of 165,000 positions. They expect the U.S. unemployment rate will remain steady at 7.5 percent. The jobs report will come one hour before U.S. stock trading begins on Friday.
When stocks turned lower earlier in Thursday's session, that reflected some concerns by investors that the May reading could be weaker than expected and signal softness in the labor market.
"Technically, the 1,600 level is an important area to hold," said Michael Sheldon, chief market strategist at RDM Financial, in Westport, Connecticut. "It's only natural to have a little bit of a" bounce from that level.
The pickup in market volatility over the past couple of weeks reflects investors' uncertainty over Fed policy, combined with worries about a still sluggish global economy, he said. At one point in the session, the Dow was down more than 100 points. From its session low of 14,844.22 to its intraday high at 15,040.62, the Dow's swing covered 196.4 points.
"The market is transitioning from a liquidity-driven rally to one based on economic fundamentals," Sheldon said.
The Dow Jones industrial average .DJI rose 80.03 points, or 0.53 percent, to close at 15,040.62 - its session high. The Standard & Poor's 500 Index .SPX advanced 13.66 points, or 0.85 percent, to finish at its session high of 1,622.56. The Nasdaq Composite Index .IXIC gained 22.58 points, or 0.66 percent, to end at 3,424.05 - also its session high.
The S&P 500 is up 13.8 percent so far this year after repeatedly hitting record highs.
All 10 S&P 500 sectors ended higher, though technology .SPLRCT was the weakest performer, ending up just 0.1 percent. Among tech's biggest losers for the day were Netflix (NFLX.O), down 2.6 percent at $217.74, and Oracle ORCL.O, down 2.3 percent at $33.35.
On the plus side, Regeneron Pharmaceuticals (REGN.O) shares jumped 9.8 percent to $252.17. The stock ranked as the biggest percentage gainer in both the S&P 500 and the Nasdaq 100 .NDX following news that a late-stage trial of an eye drug it is developing with Bayer (BAYGn.DE) had positive results.
Biogen Idec (BIIB.O), up 3.3 percent at $221.19, was another health care standout in Thursday's session and helped lift the Nasdaq 100 index.
Defensive sectors such as health care have led gains in this year's rally. But the recent rise in U.S. bond yields has made those sectors less appealing since many of them contain stocks with high dividend yields.
Verizon Communications (VZ.N) was the Dow's biggest percentage gainer, ending up 3.5 percent at $49.97. Rival AT&T (T.N), up 1.6 percent at $35.81, also bolstered the Dow. After the close, AT&T updated its second-quarter guidance with projections of strong growth in its wireless customers' ranks. The stock, however, fell 1.5 percent to $35.26 in after-hours trading.
American Express (AXP.N) was also among the Dow's top gainers, rising 2 percent to $76.24.
Keith Bliss, senior vice president at Cuttone & Co in New York, said the day's gains in the U.S. stock market also came as the dollar fell against the yen and euro. That move was triggered by worries that U.S. jobs data would disappoint and prompt the Fed to keep its stimulus programs intact.
The European Central Bank kept interest rates unchanged on Thursday and left other policy tools untouched after discussing options it could use if the euro zone's economy does not come out of recession later this year. ECB President Mario Draghi said economic conditions did not justify moves such as requiring banks to pay to leave their money with the central bank overnight.
Retail stocks rose, with major U.S. chains reporting monthly sales that were largely in line with expectations. Shares of Costco Wholesale Corp (COST.O) rose 1.8 percent to $111.09, while the S&P retail index .SPXRT shot up 1.2 percent.
Volume was roughly 6.9 billion shares traded on the New York Stock Exchange, the Nasdaq and the NYSE MKT, above the average daily closing volume of about 6.4 billion this year.
Advancers outnumbered decliners on the NYSE by nearly 4 to 1 and on the Nasdaq by a ratio of more than 2 to 1.
(Additional reporting by Alison Griswold; Editing by Jan Paschal)