Stocks rally; Caterpillar, 3M spark investor optimism

U.S. stocks surged on Thursday, lifting the Dow industrials back into positive terrain for the year, as heavy-equipment maker Caterpillar boosted its profit outlook and an unexpected increase in euro-zone manufacturing eased worries about the global economy.

But equities pared gains in late trading as New York City's Bellevue Hospital said it was testing a doctor who recently returned from West Africa for Ebola after he exhibited some symptoms consistent with the virus. He was the latest of many patients to have been tested for Ebola-like symptoms in the city in recent weeks; all of the prior tests were negative.

Read more: Doctor recently back from Africa being evaluated at Bellevue: sources

"You would think that if Nigeria could contain it, then so could we, but this is a very manic-depressive market that we're in," said Peter Boockvar, chief market analyst at the Lindsey Group, who instead offered the view that the market retreated after the S&P 500 hit technical resistance at its 100-day moving average of 1,961.50.

"I guess we rolled over during it. I don't know why we were up 35 points to begin with," said Boockvar.

Investors fled perceived safe-havens including U.S. Treasury notes and gold, buying assets viewed as riskier as corporate earnings and projections for the future, especially from multinationals, eased worries about the global economy.

Caterpillar rallied after reporting a quarterly profit that soared past estimates; 3M jumped after the diversified manufacturer posted higher quarterly profit, and General Motors also tallied a better-than-expected profit in the third quarter.

"It's earnings. When we started the day the Dow was still down on the year, then you saw Caterpillar and GM come out with good news," said Chris Gaffney, senior market strategist, Everbank Wealth Management, referring to the Dow's return to the black for 2014.

The volatility of last week could be interpreted as a sign that investors are worried about whether the U.S. economy can stand on its own, once the Federal Reserve pulls the plug on bond purchases, otherwise known as quantitative easing, said Gaffney. "This week, these earnings show perhaps it will."

On Thursday, the CBOE Volatility Index, a measure of investor uncertainty, fell 7.5 percent to 16.53.

Thursday's economic reports had the four-week average of Americans filing for jobless benefits dropping to a 14-year low.

The Conference Board's index of leading indicators for September increased 0.8 percent.

Surveys had euro-area businesses performing far better than expected in October, along with a slight expansion in China's manufacturing sector.

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Retreating from session highs that had it up 306.20 points, the Dow Jones Industrial Average ended up 216.58 points, or 1.3 percent, to 16,677.90, with Caterpillar and 3M leading blue-chip gains.

The S&P 500 advanced 23.71 points, or 1.2 percent, to 1,950.82, with industrials and energy leading gains among its 10 main sectors and telecommunications and consumer staples the laggards.

The Nasdaq.rallied 69.95 points, or 1.6 percent, to 4,452.79.

For every share falling, more than three gained on the New York Stock Exchange, where nearly 819 million shares traded. Composite volume neared 3.8 billion.

Traders on the floor of the New York Stock Exchange.
Brendan McDermid | Reuters
Traders on the floor of the New York Stock Exchange.

The 10-year Treasury note yield, used in determining rates on mortgages and other consumer loans, jumped 6 basis points to 2.274 percent.

The U.S. dollar edged higher against the currencies of major U.S. trading partners and dollar-denominated commodities were mixed.

On the New York Mercantile Exchange, December gold futures fell $16.40, or 1.3 percent, to $1,229.10 an ounce, and crude-oil futures for December rose $1.57, or 2 percent, to $82.09 a barrel.

On Wednesday, U.S. stocks turned lower, following the S&P 500's biggest jump in a year, as investors considered the fatal shooting of a soldier in Ottawa, reports of gunfire in the halls of Canada's Parliament and oil falling to a more-than two-year low.

Read MoreStocks end sharply lower; oil, Canadian shooting cited

Coming Up This Week:

Friday

Earnings: Bristol-Myers Squibb, Colgate-Palmolive, Ford, UPS, Procter and Gamble, Nasdaq, Delphi Automotive, State Street, Ericsson, Shire

10:00 a.m.: New home sales

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