Major U.S. indexes advanced on Thursday as investors were soothed after China denied a report that it was reviewing its holdings in euro-zone sovereign bonds due to the region's debt crisis.
The People's Bank of China said a Financial Times report that Beijing was concerned about its euro-zone exposure was groundless. The report had cut short a rally in the previous session.
China not selling debt suggests that while we'll continue to hear problems from the region, the crisis has passed, said Paul Kasriel, senior vice president of Northern Trust in Chicago.
People are coming to the realization that the global recovery doesn't hinge on Greece, Portugal and Spain.
Microsoft Corp also lifted markets, rising 4 percent to $26.01 after FBR Capital Markets upgraded the Dow component to outperform, citing improving fundamentals and recent share underperformance.
The Dow Jones industrial average <.DJI> shot up 195.36 points, or 1.96 percent, to 10,169.81. The Standard & Poor's 500 Index <.SPX> rose 23.89 points, or 2.24 percent, to 1,091.84. The Nasdaq Composite Index <.IXIC> climbed 59.62 points, or 2.72 percent, to 2,255.50.
The S&P 500 was trading in late morning above the 1,090 level it has failed to breach in the last week, which is seen as technical resistance.
Short-term, that's probably a level that traders are sitting on, trying to play that from the short side, but when it fails, it's going to fail spectacularly, said Richard Ross, global technical strategist at Auerbach Grayson in New York.
But he said a more significant indicator would be a close above the 200-day moving average, now right above 1,104.
The Dow jumped back above 10,000 and the CBOE Volatility Index <.VIX> fell 13 percent to levels seen in the middle of May before investors got rattled over the fragility of the European banking system.
Data showing the U.S. economy grew at a slower pace than expected in the first quarter was not enough to keep investors from grabbing bargains after major indexes dropped more than 10 percent over the past month.
In other data released on Thursday, new applications for state jobless benefits dropped to 460,000 last week from 474,000 in the previous week, the Labor Department said, pointing to a gradual labor market recovery.
The labor market has made a fundamental turn for the better, but it is going to be a slow recovery there, Kasriel said.
Energy shares, among the casualties in a recent sell-off, rose sharply, with the S&P energy index <.GSPE> up 3 percent, the top percentage gainer among S&P sectors.
July crude futures gained 3.9 percent to $74.30 a barrel, tracking equities and lifting Chevron Corp 2.8 percent to $73.53. Chevron gave the Dow its biggest boost, on a points basis, while Microsoft was the Dow's percentage leader and the Nasdaq's most actively traded stock.
Fellow Dow component Pfizer Inc rose 1.1 percent to $15.27 after the drugmaker said it would stop recruiting patients for a clinical trial for its heart drug Inspra because the study reached its main efficacy goal early.
In earnings news, both Costco Wholesale Corp and Tiffany & Co reported quarterly profits that beat expectations. Tiffany also raised its outlook. Costco advanced 4.7 percent to $58.61 while Tiffany shot up 5.1 percent to $45.80.
On the downside, Monsanto Co shed 7 percent to $48.99 after it cut its 2010 profit outlook.
(Reporting by Ryan Vlastelica; Additional reporting by Rodrigo Campos; Editing by Jan Paschal)