Stocks closed higher and the Dow recorded its second straight double-digit gain as investors were encouraged by strong earnings reports despite lingering subprime concerns.
"There wasn't much negative news today from the subprime market and people still want to buy the market," said Todd Leone, head of listed trading at Cowen & Company. "We were way oversold and I think you have some people putting money to work. It was a healthy bounce."
"It's very positive for the market but people are still waiting for something to come out of subprime," Leone added.
The late afternoon spike in stocks, particularly in the Dow Jones Industrial Average, was reminiscent of Wednesday's late rally when the Dow recovered from negative territory to close up 150 points. The last time the Dow saw two straight sessions of triple-digit gains was in June 2006.
"I thought we were going to close up a lot or down a lot (on Wednesday) but a half hour before the close the market exploded to the upside," said Scott Wren of A.G. Edwards. "I thought it was an important day for the market, it was on big volume."
"We're trying to form a short-term bottom, we have to wash out some worries about subprime, hedge funds and M&A deals that may not go through," said Tom Schrader, managing director of U.S. listed trading at Stifel Nicolaus. "But we had a good intermediate correction and it looks like we are setting up a base for a rally."
Seven of 10 economic sectors tracked by S&P traded higher, led by a gain of 0.5% for tech stocks and a 0.4% rise in the health care sector. Energy was far and away the day's worst performing sector with a decline of 1.6%.
The mortgage lending industry remains under pressure as investors continue to weigh the risks stemming from the subprime market as the ABX subprime mortgage derivative index carved out a new record low.
Countrywide Financial shares fell after bond insurer MBIA said delinquencies are rising among some subprime home loans serviced by Countrywide .
"It's well beyond subprime ... this is going to migrate for awhile," said Robert Albertson, chief strategist at Sandler O'Neill. "I would not be in financials at this point with the exception of the large U.S. banks."
Hewlett-Packard was the Dow's biggest percentage gainer after Banc of America Securities initiated coverage on the company with a "buy" rating, while Exxon Mobil was the blue chip index's worst performer.
Nokia, the world's largest mobile phone maker, said that second-quarter earnings more than doubled on strong sales and that it had further increased its market share.
Viacom posted a decline in second-quarter profit, however strength in its filmed entertainment segment helped boost revenue for the media company. The company reported adjusted earnings of 54 cents a share, above analysts' consensus forecast of 50 cents.
"I think what you're seeing is that earnings are solid," said Peter Yastrow, market strategist at MF Global. "People are looking past their short-term fears of something in the mortgage-backed market surfacing and just betting on the fundamentals."
In other earnings news, NYSE Euronext posted its first set of results as a joint entity with a 164% jump in second-quarter profit Thursday, and Dow component Walt Disney beat expectations with a 14% increase in quarterly earnings after the bell Wednesday.
Tiny drug developer Pozen saw shares plunge after the FDA delayed approval of its migraine drug Trexima due to safety concerns.
A massive product recall by Mattel on Wednesday is expected to cost the toy maker about $30 million, according to its own estimates. About 1.5 million toys, which were made in China, are to be withdrawn on safety concerns.
In mergers and acquisitions news, Fiserv said it will buy CheckFree an online check and bill-pay service,in a deal valued at $4.4 billion. CheckFree shareholders will receive $48 a share in cash for each share of common stock.
In economic news, the amount of people claiming unemployment benefits for the first time increased last week by 4,000 to 307,000. Jobless claims were expected to grow by 9,000 for the week ended July 28. Factory orders rose 0.6% in June, less than the 1% increase that was expected.
New York light sweet crude futures closed just below $77 a barrel after refinery utilization rates came in above expectations. Crude declined after hitting a new intraday high on Wednesday at $78.70 a barrel on the New York Mercantile Exchange.
European Stocks Close Higher
The major European markets closed higher with gains seen in London, Paris and Frankfurt.
"What we've got is an increase in volatility … there are going to be some stocks and some markets that throw up some really attractive opportunities," Chris Tinker, equity strategist at ICAP, told "Squawk Box Europe."
The European Central Bank held its benchmark rate steady at 4%, as inflation in the 13 nations that use the euro remains below the central bank's warning level. The Bank of England left its key rate unchanged at 5.75% following last month's quarter-point increase.
A big batch of earnings also gave investors something to trade on, with banking stock mostly higher on solid results.
The FTSE-100 closed higher as shares of Unilever rose as second-quarter sales beat expectations of the consumer goods maker. In the banking sector, Barclaysposted a 12% rise in pretax profit, sending shares higher and easing fears of U.S. subprime lending contagion.
Shares of Credit Suisse rose after surprising the market with a 48% jump in second-quarter net profit. The Swiss bank highlighted investing banking strength in its report, which is consistent with statements from BNP Paribas and Deutsche Bank Wednesday.
The CAC-40 gained after Societe Generale beat forecasts with a 32.7% rise in second-quarter net profit. France Telecom also did better than predicted in the first half with strong sales in emerging markets.
Asian Stocks Mostly Higher
It was a volatile trading session in Asia Thursday, with markets swinging back and forth to finish mixed on fears a global credit crunch is at hand. Japan closed higher, but was down over 1% at one point.
Tokyo's Nikkei 225 Average finished stronger as property stocks such as Mitsubishi Estate rose on land price data and Japanese drug maker Astellas Pharma climbed on higher profits. But bank shares rang up losses, with Mizuho Financial hitting its lowest since October 2005 at one point amid profit worries and global credit concern.
South Korea's KOSPI ended just slightly down but fell enough to hit their lowest close in a month as financial firms declined. Gains in technology firms, however, prevented another
washout. A wide-ranging session saw the main index climb as much as 1.85% in morning trade and then slump as much as 2.47% in the afternoon, only to pull back by the close.
China's stock market closed higher but Hong Kong stocks retreated from early gains to a flat position as investors took bigger cash positions as credit concerns related to the U.S. subprime mortgage market increased.