Bargain hunters lift Dow 553 points, S&P up 7 percent

NEW YORK (Reuters) - Stocks surged on Thursday and broke a three-day losing streak after the S&P 500 and Nasdaq touched new five-year lows earlier in the session, prompting investors to put aside worries about the flagging economy and scoop up wilted shares at fire-sale prices.

Capping off a volatile session, energy stocks led the market higher alongside a recovery in oil prices as OPEC looked ready to cut production again. Chevron (CVX.N) and Exxon Mobil (XOM.N) gave the Dow its biggest lift, while oil rose over 5 percent above $59 a barrel in post-settlement trading.

But analysts said news about the economy was still grim, after Intel Corp (INTC.O) slashed its revenue outlook, underscoring concerns that the ailing global economy is hurting technology spending by businesses and consumers.

At one point during Thursday's session, the S&P 500 fell below its October 10 closing low to its lowest since March 2003,

a key technical breach that traders said suggested the market could find short-term support. The Dow industrials briefly fell below 8,000, while both the S&P 500 and Nasdaq fell through their 2008 lows set in October.

"The fundamental news right now is just dreadful," said Phil Orlando, chief equity market strategist at Federated Investors in New York, adding that the market "ended up blowing through the support level we thought we had established at the bottom of the market on October 10."

Orlando said there was nothing fundamental to account for the afternoon surge, noting that "technically, some folks thought they needed to put money to work."

The Dow Jones industrial average .DJI jumped 552.59 points, or 6.67 percent, to 8,835.25. The Standard & Poor's 500 Index .SPX surged 58.99 points, or 6.92 percent, to 911.29. The Nasdaq Composite Index .IXIC climbed 97.49 points, or 6.50 percent, to 1,596.70.

The three major U.S. indexes swung in a wide band from high to low, with the S&P 500 traveling 94.32 points from its session low at 818.69 to intraday peak at 913.01, while the Dow industrials covered 911.17 points and the Nasdaq moved 168.16 points.

Chevron jumped 12.5 percent to $75.71, while Exxon rose 9.4 percent to $75.41. An S&P index of energy companies .GSPE soared 11.1 percent.

Intel reversed an earlier decline and rose 6.7 percent to close at $14.43 on the Nasdaq, spurring other big-cap technology shares to shift gears and push higher.

After Wednesday's closing bell, Intel cut its revenue outlook, citing weak demand globally.

Among gainers, Microsoft (MSFT.O) rose 4.7 percent to $21.25, while Apple (AAPL.O) gained 7 percent to $96.44.

Citigroup Inc (C.N) pared earlier losses, but remained the biggest drag on the Dow, losing 2 percent to $9.45, after a report that directors are unhappy with the bank's performance and may replace its chairman. Citi's board of directors reiterated its full support for Chairman Win Bischoff.

General Motors GM.N fell 4.2 percent to $2.95 after Goldman Sachs suspended its rating and said the ailing automaker needs at least $22 billion in federal aid.

Wal-Mart Stores Inc (WMT.N) gained 4.4 percent to finish at $54.93, after moving between negative and positive territory throughout the session. Wal-Mart, the world's biggest retailer and a Dow component, reported a slightly better-than-expected rise in quarterly profit, but lowered its full-year outlook.

Adding to the negative outlook on the economy, a government report showed the number of people filing new claims for jobless benefits in the latest week shot to the highest in seven years, since the weeks after the September 11 attacks in 2001.

Trading was active on the New York Stock Exchange, with about 1.99 billion shares changing hands, slightly above last year's estimated daily average of roughly 1.90 billion. It was the heaviest volume in four weeks. On Nasdaq, about 3.01 billion shares traded, above last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on both the NYSE and the Nasdaq by a ratio of more than 2 to 1.