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Stocks End Higher, but Euro Zone Fears Linger

Stocks closed higher in thin, choppy trading Thurday as investors snapped up beaten-down sectors from the previous session's sharp selloff, but ongoing worries over the euro zone crisis limited gains.

The Dow Jones Industrial Average rallied 112.92 points, or 0.96 percent, to close at 11,893.86, led by Cisco and Merck .

The S&P 500 added 10.60 points, or 0.86 percent, to finish at 1,239.70. The Nasdaq eked out a gain of 3.50 points, or 0.13 percent, to end at 2,625.15.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled almost 10 percent to finish below 33.

All S&P sectors finished in positive territory, led by energy and health care.

“At this point, the global risk is overdone and the attention has correctly moved back to fundamentals,” said Doug Cote, chief investment strategist for ING Investment Management. “And fundamentals, especially with reports this morning, will continue to march ahead and will lead to a year-end rally.”

Stocks jumped at the open, attempting to rebound from its worst day in almost three months, after a better-than-expected jobless claims news and following reports that the ECB is buying Italian and Spanish bonds.

Stocks pared some gains following market rumors that France's triple-A rating could be placed on negative watch. Meanwhile, S&P's said "a technical error" caused the message to be sent and that it was investigating the issue.

In Italy, Berlusconi’s party is discussing the option of supporting a unity governmentled by former European commissioner Mario Monti as well as early elections, according to Reuters, citing a senior party official.

A fairly positive Italian bond auctionalso boosted investors’ confidence.

In Greece, former ECB vice-president Lucas Papademos was selected to lead Greece's new crisis coalition after almost four days of talks and speculation. Papademos will act as the interim government until Greece's early election, which is expected in February.

“If investors are assuming that problems in Europe are solved, they’re going to be disappointed,” said Jack Ablin, chief investment officer at Harris Private Bank. “But while concerns regarding the EU credit is well founded, worries that the tentacles will stretch back to the U.S. is unfounded—this has been a problem that’s moved so slowly for so long that it shouldn’t surprise anybody.”

In fact, Ablin said this is a good time for longer-term investors to jump in and buy mega-cap stocks at a discounted rate.

Apple slipped amid ongoing rumor of slowing production of its new iPhone 4s.

Cisco surged after the tech bellwether forecast sales and profit above estimates as demand for its network equipment remained resilient despite global economic woes. Meanwhile, at least eight brokerages raised their price targets on the firm.

Green Mountain tanked almost 40 percent after the coffee producer posted weak revenue, causing investors to worry about the firm's growth potential.

Kohl's gained after the department store chain boosted its full-year profit forecast and said it expects robust sales during the holiday.

Advance Auto Parts gained after the auto parts retailer reported better-than-expected results and forecast full-year earnings above estimates. In addition, at least two brokerages raised their price targets on the firm, while another two boosted their ratings.

Disney , Nordstrom and Nvidia are scheduled to post earnings after-the-bell tonight.

Merck gained after the drugmaker boosted its quarterly dividend by 11 percent, its first increase in seven years.

Treasury prices extended their lossesafter the government auctioned $16 billion in 30-year bonds at a high yield of 3.199 percent and a bid-to-cover of 2.40.

On the economic front, weekly jobless claims declined 10,000 to a seasonally adjusted 390,000, the lowest level since the first week of April, according to the Labor Department.

Meanwhile, the U.S. trade deficit unexpectedly shrank to $43.1 billion in September to its narrowest level since December, according to the Commerce Department. Economists had expected the trade deficit to widen to $46 billion, according to a Reuters poll.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC

On Tap This Week:

FRIDAY: US Holiday—Veteran's Day. Markets open, banks closed. Consumer sentiment, French short sale ban ends

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