NEW YORK (Reuters) - Stocks shot up 4 percent on Thursday as bargain-hungry investors overcame the recent wave of fear that drove selling over the last two weeks.
Thursday’s rally marked the second bounce in a yo-yo week. After a sell-off that pushed the S&P 500 down as much as 17 percent since July 22, the market is showing some signs of regaining its footing.
“It’s a bungee cord market. We’ve fallen off of a small bridge, the bungee cord bounced us up, and oscillations will diminish, but we’re still bouncing around,” said Fred Dickson, chief market strategist at D.A. Davidson & Co., in Lake Oswego, Oregon.
Investors used results from Cisco and a slight dip in weekly U.S. jobless claims as the catalyst to snap up beaten-down stocks. Worries about the spread of the European debt crisis were also somewhat alleviated after news of a meeting between France’s Nicolas Sarkozy and Germany’s Angela Merkel set for Tuesday.
Financials outpaced other S&P 500 sectors after leading losses in the previous session. But bank borrowing costs were under some pressure overseas.
The CBOE Volatility Index, known as the VIX, shed 9.3 percent, though it remained near levels not seen in over a year. The day’s trading volume on the New York Stock Exchange, NYSE Amex and Nasdaq, was 12.99 billion -- well above the year’s estimated daily average of 7.8 billion.
The Dow Jones industrial average surged 423.37 points, or 3.95 percent, to 11,143.31. The Standard & Poor’s 500 Index shot up 51.88 points, or 4.63 percent, to 1,172.64. The Nasdaq Composite Index jumped 111.63 points, or 4.69 percent, at 2,492.68.
“We’re seeing a net flow of buy orders from retail investors here, so they’re looking for bargains. I have not had anybody call me and say, ‘Here’s what I own. Tell me what I ought to sell,’ and I’ve seen that in other high-volatility periods,” Dickson said.
After the close, Nvidia Corp shares jumped 15.6 percent to $15.50 after the graphics chipmaker gave a quarterly revenue forecast that exceeded analysts’ average forecast.
While the major indexes showed strong gains on Thursday, the S&P 500 has fallen for 11 of the past 14 sessions.
Analysts said they still awaited a bottom in the correction that has taken the S&P 500 down 14 percent from its April 29 closing high.
“The trend is downward now. We’re having a big up day, but it’s been very volatile. We’ve been up against resistance for a little while in the 1,170 level in the S&P 500 ... our next level I believe is 1,188,” said Stephen J Guilfoyle, U.S. economist for Meridian Equity Partners and institutional sales trader on the NYSE floor.
One sign the market’s downturn may not be over is a measure of stocks with 52-week highs versus 52-week lows, according to Bruce Zaro, chief technical strategist at Delta Global Asset Management in Boston.
“Some days need to pass before that indicator reverses,” which would then suggest a bottom, he said.
Among the day’s best sectors, the S&P financial index jumped 6.3 percent, while the semiconductor index gained 5.2 percent. Another top advancer was the Dow Jones Transportation Average, up 4.3 percent.
Retailers also provided support after Kohl’s Corp advanced 7.3 percent to $47.50 after the moderate-priced department store chain’s quarterly earnings beat estimates and it raised its full-year profit view. The S&P consumer discretionary index rose 4.5 percent.
Labor Department data showed new U.S. claims for unemployment benefits dropped to a four-month low last week, a dose of better news after a spate of soft economic data.
Cisco Systems Inc jumped 16 percent to $15.92 a day after it reported quarterly revenue and profits that topped scaled-back expectations.
Advancing stocks outnumbered declining ones on the NYSE by about 12 to 1 and on the Nasdaq by about five to one.
Reporting by Caroline Valetkevitch; Additional reporting by Rodrigo Campos; Editing by Jan Paschal