U.S. stocks rose on Thursday, rebounding from the previous day's steep losses on positive corporate news, but trading was choppy as nervous investors reacted to headlines painting a mixed picture of Europe's debt crisis.
Merck raised its dividend and Cisco reported strong earnings, reinforcing the view that while problems in Europe were still on investors' minds, there were signs of strength in Corporate America.
Wall Street got an early boost after the European Central Bank bought Italian bonds and the government completed a successful bond auction. But trading turned volatile as French bond yields surged on concerns about the nation's credit rating.
Standard & Poor's said a technical error caused a message to be sent suggesting France's credit rating had been changed. S&P said that was not the case, and it was investigating the cause of the error.
U.S. crude oil gained 2.4 percent, helping to lift energy shares. The S&P energy group <.GSPE> rose 1.8 percent and led all sectors, while industrials <.GSPI> added 1.1 percent and materials <.GSPM> was up 1.2 percent.
Oil and gas producer Hess Corp
These are the names people are gravitating to, because if a recovery comes out of Europe these industries will be in high demand, said Michael Matousek, senior trader at U.S. Global Investors Inc, which manages about $3 billion in San Antonio.
However there's still a lot of volatility, and if we drop back under 1,225 on the S&P we'll know there's not a lot of buying power out there.
The Dow Jones industrial average <.DJI> was up 128.66 points, or 1.09 percent, at 11,909.60. The Standard & Poor's 500 Index <.SPX> was up 10.72 points, or 0.87 percent, at 1,239.82. The Nasdaq Composite Index <.IXIC> was up 6.87 points, or 0.26 percent, at 2,628.52.
The S&P 500 fell 3.7 percent on Wednesday, its worst daily percentage drop since August 18.
In October, the index recorded its best monthly performance in 20 years on optimism European leaders were taking control of the debt crisis.
Thursday's economic data showed new U.S. weekly jobless claims declined to the lowest level since April, while the trade deficit unexpectedly shrank in September to its narrowest level since December.
Merck & Co Inc
Cisco Systems Inc
Green Mountain Coffee Roasters Inc
Italy paid its highest yield in 14 years to sell 12-month debt in an auction Thursday. Despite relief the sale went smoothly, worries festered that its borrowing costs were unsustainable.
In Greece, former European Central Bank vice president Lucas Papademos was appointed to head the country's new crisis coalition.
(Editing by Jeffrey Benkoe)