Stocks Close Near Highs, Dow Shy of 13,000

Stocks rallied for a second session Thursday, recouping from the recent selloff, boosted by stronger prospects for GDP growth in China and amid hopes for further monetary easing.

S&P 500

The Dow Jones Industrial Average surged 181.19 points, or 1.41 percent, to close at 12,986.58, just shy of the psychologically-significant 13,000 level.

H-P and Caterpillar led the blue-chip gainers.

The S&P 500 jumped 18.86 points, or 1.38 percent, to finish at 1,387.57. The Nasdaq rallied 39.09 points, or 1.30 percent, to end at 3,055.55.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled to end near 17.

All 10 S&P finished in positive territory, led by materials and energy.

Investors carefully monitored to see whether the Federal Reserve will undertake another round of easing on the heels of recent anemic economic reports. Most notably, the government reported last week that only 120,000 jobs were created in March, well below expectations.

“Today is all about more QE talk,” said Joe Saluzzi, co-manager of trading at Themis Trading. “We had poor jobs numbers today… [But] investors believe that Bernanke has their back whether we have good economic numbers or not.”

Stocks were further fueled amid speculation surrounding China's first-quarter GDP due later tonight, with some traders saying the report could be better than expectedat 9 percent, rather than the estimated 8.4 percent.

“I tend to be suspicious of Chinese economic data rumors,” cautioned Marc Chandler, head of foreign exchange strategy, adding that the rumor may be impacting markets because people believe China may be close to further easing policy.

Still, materials led the rally, with U.S. Steel and Freeport-McMoran surging sharply.

Weekly jobless claims increased 13,000 to a seasonally adjusted 380,000, rising to its highest level since January, according to the Labor Department. The four-week moving average for new claims, considered a better measure of labor market trends, rose 4,250 to 368,500.

“Looking at the week-to-week data, we’re going to see gyrations as we get into the summer lull,” said Matt Lloyd, chief investment strategist at Advisor Asset Management. “But the more important thing to look at is last week’s revision, which was higher.”

Google is scheduled to post earnings after the bell. Analysts expect the Internet giant to post earnings of $9.65 a share on revenue of $8.15 billion, according to Thomson Reuters.

Also on the tech front, Hewlett-Packard surged following news that global PC shipments surged despite expected impacts from a disk-drive shortage and a lack of new semiconductors to boost demand. Chipmakers including Broadcom and Seagate were also trading higher.

Apple turned lower even after Credit Suisse boosted its price target on the iPad maker to $750 from $700.

AT&T rose more after JPMorgan upgraded the telecom giant to "overweight" from "neutral," with a $33 price target.

Avid Technology, which makes audio and video products, disappointed traders with a forecast for first-quarter operating loss and a revenue drop that was well short of Wall Street estimates.

Financial giants JPMorgan and Wells Fargo are scheduled to report earnings Friday morning.

Among other economic news, the producer price index was unchanged in March as a drop in gasoline costs offset rising food prices, according to the Labor Department.

Meanwhile, trade deficit narrowed unexpectedly by 12.4 percent to $46.0 billion in February, according to the Commerce Department, prompting several firms including JPMorgan, Goldman Sachs and Barclays to raise their first-quarter economic growth estimates.

The economy grew at a 3 percent rate in the fourth quarter.

Treasury prices pared some lossesafter the government auctioned $13 billion in 30-year bonds at a high yield of 3.230 percent and a bid-to-cover of 2.76.

The 3-year Italian bond auction showed yields jumping to the highest level since mid-January, renewing concerns about peripheral European countries’ ability to combat spiraling public debt.

Meanwhile, natural gas prices reboundedafter inventories rose by 8 billion cubic feet. Nat gas prices settled below $2 in the previous session for the first time in almost a decade amid the mild weather and abundant supply.

—Follow JeeYeon Park on Twitter: @JeeYeonParkCNBC

Coming Up This Week:

FRIDAY: CPI, consumer sentiment, Bernanke speaks; Earnings from JPMorgan, Wells Fargo

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