Stocks Soar on ECB Bond-Buying Plans, Jobs Report Optimism

NEW YORK ( TheStreet) -- It was a breakout day for U.S. stocks Thursday as Wall Street cheered the European Central Bank's bond-buying plan and a batch of positive employment data raised the stakes for the August jobs report.

The Dow Jones Industrial Average soared more than 244 points, or 1.87%, to close at 13,292, just two points below the session high. The blue-chip index is now up 8.79% so far in 2012 and within 50 points of its intraday peak for the year of 13,338 on May 1.

All 30 Dow components finished higher. The biggest percentage gainers were Alcoa ( AA), Bank of America ( BAC), Cisco ( CSCO), General Electric ( GE), Intel ( INTC), JPMorgan Chase ( JPM), and Microsoft ( MSFT).

The S&P 500 jumped nearly 29 points, or 2.04%, to finish at 1432.12, the high for the day and the index's best close since January 2008. The S&P 500 is now up 13.88% this year.

The Nasdaq was surged more than 68 points, or 2.17%, at 3135.81, also its session high and its best level since November 2000. Year-to-date, the index has gained 20.37%.

All sectors in the broad market were in the green, led by basic materials, conglomerates, consumer cyclicals, and financials.

Advancers outpaced decliners by nearly 4-to-1 ratios on both the Big Board and Nasdaq. Volume totaled 3.94 billion on the New York Stock Exchange and 1.92 billion on the Nasdaq.

During the press conference that followed the ECB's policy meeting Thursday, the bank's President Mario Draghi said the central bank stands ready to buy unlimited quantities of short-term Spanish and Italian bonds in the secondary market if either Rome or Madrid requests a full International Monetary Fund-style reform program.

He also said the ECB could buy Spanish and Italian debt as precautionary measures without a full, IMF-style bailout.

Draghi noted the ECB bond purchases will be sterilized and said the central bank will publish its holdings by country every month.

The program will extend to bonds with maturities of up to three years and there will be no cap for yields.

Draghi asserted during the press conference that if governments do not comply with the stringent bailout terms, the ECB will stop buying its bonds.

In addition, Draghi said at least for this year, there would be no buying of Portuguese or Irish bonds.

IMF Managing Director Christine Lagarde said she strongly welcomes the new ECB framework.

Meanwhile, Bundesbank President Jens Weidmann cast the sole dissenting vote on the governing council on the ECB bond buying decision, seeing them as too close to monetary financing and worrying that the plan would undermine the central bank's credibility if reforms slowed in member states.

The ECB announced earlier Thursday that it would leave its benchmark rate unchanged at 0.75%.

The central bank also cut its outlook on the eurozone economy, predicting it will contract by between 0.2% and 0.6% this year. It also reduced its growth forecasts for next year.

A spate of uplifting datapoints on U.S. employment was released before the opening bell, prompting many economists to re-evaluate their gloomy outlook for Friday's nonfarm payrolls report for August.

"All this evidence suggests that our forecast of a 100,000 increase in August's official non-farm payroll employment measure may be too pessimistic," said Paul Ashworth, chief U.S. economist at Capital Economics.

Still, "we wouldn't expect this improvement to persuade the Fed to hold fire next week. Employment would need to grow by a lot more than 200,000 per month to bring the unemployment rate down at a pace more agreeable to the Fed," Ashworth continued.

"This surely will tilt expectations to the upside for tomorrow's employment report," said Dan Greenhaus, chief global strategist at BTIG.

The ADP report Thursday showed that employment in the U.S. nonfarm private business sector rose to 201,000 in August, up from an upwardly revised 173,000 in July. Economists forecast that private-sector employment fell to 143,000 last month.

The Labor Department said that initial jobless claims for the week ended Sept. 1 fell by 12,000 to 365,000, and that the four-week moving average rose 250 to 371,250.

Continuing claims for the week ended Aug. 25 fell to 3.322 million from 3.328 million the prior week.

Economists predicted that initial jobless claims would fall to 373,000 and that continuing claims would dip to 3.3 million.

Adding to the uplifting employment reports, consulting firm Challenger, Gray & Christmas said that planned layoffs dropped in August to a 20-month low.

In more positive data, the Institute for Supply Management said that its ISM Non-Manufacturing Index came in at 53.7 in August, better than the 52.4 economists were expecting.

The FTSE in London finished up 2.11%, while the DAX in Germany rose 2.91%.

The Hong Kong Hang Seng index tacked on 0.34% and the Nikkei in Japan closed up 0.01%.

The benchmark 10-year Treasury dropped 25/32, raising the yield to 1.679%. The greenback fell 0.17%, according to the dollar index.

October crude oil futures settled up 17 cents at $95.53 a barrel and December gold futures surged $11.60 to settle at $1,705.60 an ounce.

On the corporate front, Amazon ( AMZN) shares rose 2.1% after the company unveiled its Kindle Paperwhite e-reader and an updated version of its Kindle Fire tablet.

Men's Wearhouse ( MW) shares were jumped 18.7% after the specialty retailer of men's suits posted second-quarter earnings that beat estimates, and hiked its full-year outlook, as same-store sales increased at the company's namesake and Moores brands.

OCZ Technology ( OCZ) saw its shares drop 19% after the disk-drive maker reported preliminary fiscal second-quarter sales that missed the company's estimates due to supply shortages.

VeriFone Systems ( PAY) shares plunged 14% after the electronic payment solutions company reported fiscal third-quarter revenue that missed estimates, hurt by difficulties at the company's Brazilian operations.

Shares of Supervalu ( SVU) added 3.5% after the company said it plans to close about 60 stores. The grocer said Wednesday it would shutter most of the "underperforming or non-strategic stores" before Dec. 1.

The company suspended its dividend in June and said it was reviewing its options with financial advisers, including a possible sale of the company.

Navistar International ( NAV), the heavy truck and recreational vehicle maker, posted fiscal third-quarter earnings of $1.22 a share, with the period including an income tax benefit and costs tied to engineering integrations and non-conformance penalties. Revenue came in at $3.32 billion for the fiscal third quarter.

Analysts were expecting a loss of $1.36 a share on revenue of $2.96 billion. Shares popped more than 17%.

--Written by Andrea Tse in New York.

>To contact the writer of this article, click here: Andrea Tse.

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