Stocks jumped on Thursday after Wells Fargo said it expects to report a record quarterly profit, fueling a month-long rally prompted by hopes that deterioration in the financial sector was abating.
The state of the banks has been a key factor behind the stock market's sentiment and is at the heart of the global economic crisis. The current rally to two-month highs first took off in early March when several major banks said they had made money at the beginning of the year.
This is another step in that (banks) are about to report earnings that are not a disaster and are creeping into the black, said Bruce Zaro, chief technical strategist at Delta Global Advisors in Boston.
It's another piece of gathering evidence that banks can very likely weather and probably pass the worst operating results that they've seen.
In the latest sign that the mood of consumers is on the mend, many U.S. retailers posted smaller-than-expected sales declines for last month, signaling shoppers may be loosening their grip on their wallets.
The Dow Jones industrial average <.DJI> rose 246.27 points, or 3.14 percent, to 8,083.38. The Standard & Poor's 500 Index <.SPX> gained 31.40 points, or 3.81 percent, to 856.56. The Nasdaq Composite Index <.IXIC> climbed 61.88 points, or 3.89 percent, to 1,652.54.
The broad S&P 500 racked up its fifth consecutive weekly advance and is up more than 26 percent since the 12-year closing low reached on March 9.
In another sign of changing market sentiment, the CBOE Volatility Index <.VIX>, also known as Wall Street's fear gauge, closed at its lowest level since September 2008.
Investors also dumped defensive stocks in the consumer and health-care areas in favor of companies more tied to the economic cycle. Among losers, Merck
Shares of JP Morgan Chase
However, analysts cautioned that the news from Wells Fargo was not an all-clear signal for the sector.
It is still going to remain a bank-to-bank issue, said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co in Lake Oswego, Oregon.
I don't think one can generalize and make a blanket statement that all the bank results are going to be slightly better than what is currently expected.
President Barack Obama plans to meet with top financial regulators on Friday to discuss the next steps with the stress tests being conducted on major U.S. banks, a source said.
On the economic front, data showed the number of workers filing new claims for unemployment benefits fell last week, but the number was still at a level signaling the job market had yet to bottom.
Some recent better-than-expected data in the retail and housing sectors also helped drive the market higher as investors bet on signs of stabilization.
Among retailers, department store chain Macy's Inc
(Additional reporting by Edward Krudy; Editing by Jan Paschal)