Blue Chips Catch Fire

Updated from 4:03 p.m. EST

Stocks surged again Thursday with the Dow and S&P 500 posting their biggest single-day point gains in more than a year, as traders used a sharp decline in oil prices to extend their postelection celebration.

The Dow Jones Industrial Average closed up 177.80 points, or 1.75%, to 10,314.80, its biggest daily bounce since Oct. 1, 2003, and the seventh up session in eight. The S&P 500 rose 18.47 points, or 1.62%, to 1161.67, surpassing its 2004 closing high of 1157.76 that it touched Feb. 11. The intraday high for the year is 1163.09, which was on March 5. The Nasdaq rose 19.30 points, or 0.96%, to 2023.63, having closed above the 2000 level Wednesday for the first time since July 2.

The 10-year Treasury note was up 2/32 to yield 4.07%, while the dollar fell to a nine-month low against the euro and also was lower against the yen.

Volume was relatively strong on the New York Stock Exchange, where 1.7 billion shares changed hands with advancers beating decliners by a margin of 7 to 2. At the Nasdaq, 1.8 billion shares traded and advancers came in ahead of decliners 3 to 2.

Oil closed lower, falling $2.06 to $48.82, a five-week low, following a big rise in U.S. crude inventories reported Wednesday.

On the geopolitical front, there were conflicting reports on whether Palestinian leader Yasser Arafat had died. Arafat, 75, had traveled to France for treatment at a military hospital.

Thursday's gains were a function of lower oil, "an add-on to the re-election rally, or the hopes that, with Arafat's passing, the prospects for peace will improve," said Barry Hyman, equity market strategist at Ehrenkrantz King Nussbaum. "Whatever the reason, there's money flowing into the market.

"The prevailing opinion was sell into the rally, and we could have done that yesterday or today," Hyman said. "You've got to be impressed with this market, but the fact that we've rallied for the last two days makes it even more critical that tomorrow's employment data supports what has happened over this past week."

The Labor Department is expected to say that 175,000 jobs were created in October when it reports the number Friday before the bell.

Sector maneuvering was prevalent Thursday despite the broad market advances, showing "strength in retail, gold and health care," said Michael Sheldon, chief market strategist at Spencer Clarke LLC. "The weakness we're seeing is in the homebuilders and tech shares," due in part to weakness in Qualcomm's(QCOM Quote) quarterly results.

Qualcomm said after the bell Wednesday that third-quarter earnings rose to $393 million, or 23 cents a share, on a 57% increase in overall revenue to $1.12 billion. Adjusted earnings of 29 cents a share matched estimates but the sales line was soft, leading to a 4.5% decline in the shares Thursday morning.

The "jockeying" for position in various sectors suggested that "investors are trying to figure out, from a sector standpoint, what a second Bush term means in the market," said Jay Suskind, head of institutional equity trading at Ryan Beck & Co. "Also, we're seeing the aggregate underpinnings of positive sentiment out there, the uncertainty is gone, and looking at the fundamentals, [investors] are seeing that things aren't so bad out there.

"You're going to see some differing opinions about the sectors, based on where the marketplace determines the impact of the president's agenda," Suskind added.

On the economic front, the Labor Department announced that initial jobless claims for the week ended Oct. 30 fell to 332,000 from 350,000. Analysts had expected the number to fall to 340,000.

Also, the government said that preliminary third-quarter productivity figures showed a rise of 1.9%, while unit labor costs rose 1.6% in the same period. Experts had predicted a rise of 1.7% in productivity and a 1.8% increase in unit labor costs.

Wal-Mart(WMT Quote) reported a 2.8% same-store sales increase in October and maintained its range for growth of 2% to 4% in November. The discount giant put third-quarter earnings at 52 cents to 54 cents a share, saying slightly soft sales were offset by higher margins and a lower tax rate. Shares of the retail giant rose $1.78 to $56.26.

Also reporting was Pier 1(PIR Quote), which said October same-store sales fell 5.9% from a year ago, compared with expectations for a 4.5% decline; Urban Outfitters(URBN Quote), which said comps soared 18%; and bebe stores(BEBE Quote), which said comp growth was 30.6% in October, about twice Wall Street's estimate.

Shares of Pier 1 added 36 cents to $18.64, while Urban Outfitters rose $2.21 to $43.54 and bebe stock jumped $4.41, or 13.9%, to $36.05.