Watch Art Cashin: Econ data, earnings jolt stocks

Cashin says hedgies covering shorts and going long

Art Cashin, UBS director of floor operations at the NYSE, said there are four factors causing stocks to snap back after yesterday's losses: eased terror concerns following Wednesday's shootings in Canada, upbeat global manufacturing data, a recovery in oil prices and decent earnings, which are forcing hedge funds back into the market

"When it turned out to be a lone terrorist yesterday … the sense that it was not a broader conspiracy or does not appear to be a broader conspiracy gave a little sigh of relief," said Cashin, reflecting on the shootings in Ottawa.

Better-than-expected manufacturing data out of China, the eurozone and Germany are also benefiting stocks, helping Europe to close near session highs and mostly in the green.

"People had been very worried about that China number [HSBC Manufacturing PMI], and it was decent enough that it did not hit on the oil market," Cashin said.

Read MoreWatch Art Cashin: Stable oil prices support market

Brent crude oil and WTI crude oil are both up more than a percent, despite a higher U.S. dollar, after WTI almost dipped below the crucial $80 level Wednesday.

"Several of the earnings were virtual blowouts," Cashin noted. "That all came together to panic our friends in the hedge fund world who seem to have scrambled to cover their shorts and go long because the end of the year is coming up, and the performance has not been that high."

Of 22 major companies that reported earnings this morning, 21 beat or matched expectations. S&P Capital IQ anticipates third-quarter earnings growth of 5.45 percent, which is up from estimates at the beginning of the quarter. Strong results from Caterpillar, 3M and Dr. Pepper Snapple are giving major averages a boost.