Stocks finished at session highs Thursday, logging a three-day rally led by financials, after the ECB announced new liquidity measures to support banks in the euro zone and as investors waited for the crucial monthly non-farm payrolls report at the end of the week.
The Dow Jones Industrial Average rallied 183.38 points, or 1.68 percent, to finish at 11,123.33, above the psychologically-important 11,000 mark. Alcoa and BofA led the Dow gainers.
The blue-chip index has climbed more than 4 percent over the last three days.
The S&P 500 rose 20.94 points, or 1.83 percent, to end at 1,164.97. The Nasdaq jumped 46.31 points, or 1.88 percent, to close at 2,506.82.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, finished below 37.
All 10 S&P sectors ended in the black, led by banks and materials.
“We’re still reacting to headlines—there’s relief that banks are going to be helped out by the ECB, but this is a short-term reaction…it’s going to be bad news for the financials longer-term,” said Brian Battle, vice president of trading at Performance Trust Capital Partners.
Europe’s leaders said they are prepared to help the region's weakest banks and want to recapitalize lenders to calm investor fears. And German Chancellor Angela Merkel said Europe should not hesitate to recapitalize its banks to prevent further damage to the euro zone during a news conference.
BofA , Citigroup and Morgan Stanley all rallied.
Meanwhile, the ECB held interest rates steadyat 1.5 percent as last month's rise in inflation offset pressure to respond to the euro zone's worsening debt crisis by easing borrowing costs.
Stocks initially struggled at the open after investors digested ECB President Jean-Claude Trichet's grim economic outlook.
"Ongoing tensions in financial markets and unfavorable effects on financing conditions are likely to dampen the pace of economic growth in the euro area in the second half of the year," said Trichet in a news conference following the rate announcement. "The economic outlook remains subject to particularly high uncertainty and intensified downside risks."
