US stocks rallied on Thursday, as investors were relieved after Federal Reserve Chairman Ben Bernanke steered clear of fuelling inflation concerns, and strong earnings from investment bank Bear Stearns Cos boosted financial shares.
Investors extended a late-day rally from Wednesday and snapped up downtrodden shares after weeks of rout. A rise in tech shares, including Qualcomm Inc, Apple Computer Inc and Yahoo Inc helped push the Nasdaq Composite Index to its biggest one-day gain in more than two years.
Microsoft Corp shares were in focus as the company said after the bell that chairman Bill Gates will transition out of a day-to-day role in the company in 2008.
The Dow Jones industrial average rose 198.27 points, or 1.83 percent, to 11,015.19, closing above the 11,000 level for the first time in more than a week. The Standard & Poor's 500 Index made its biggest one-day gain in more than 2-1/2 years, rising 26.12 points, or 2.12 percent, at 1,256.16. The Nasdaq Composite Index was up 58.15 points, or 2.79 percent, at 2,144.15.
"The reason it's up isn't so much that Bernanke said anything; it's what he didn't say," said Jim Paulsen, chief investment strategist with Wells Capital Management in Minneapolis, Minnesota. "Leading up to this, people thought he might be more hawkish" given recent data showing an uptick in inflation.
Speaking before the Economic Club of Chicago, Bernanke said inflation expectations had "fallen back somewhat" and that the impact of high energy prices on the economy has been limited. That offset worries from earlier this week when core consumer and producer price data rose above expectations.
His comments suggested the Fed may have room to pause in its two-year-long cycle of interest rate hikes in the next few months, investors said. Fed fund futures have fully priced in an interest rate hike at the Fed's next policy meeting on June 28-29. Shares of Bear Stearns rose 5.9 percent to $131.56 on the New York Stock Exchange after the investment bank said quarterly profit rose 81 percent.
Shares of Citigroup Inc, the world's largest financial services company, jumped 1.8 percent to $48.68. On the technology front, shares of wireless technology company Qualcomm rose 3.8 percent to $44.89 on the Nasdaq. The company raised its quarterly earnings outlook on Tuesday.
"The Nasdaq has a lot of high volatility stocks so it's not surprising that they rebound a bit more rapidly," said Greg Fuss, Managing Director at Deutsche Bank Private Wealth Management. "I'd give you pretty good odds that we've seen the worst."
Apple shares rose 3.1 percent to $59.38 after Citigroup reiterated its "buy" rating on the stock, and Yahoo shares climbed 4 percent to $30.79. A rise in crude oil prices also boosted energy shares, including Exxon Mobil Corp, which gained 2.3 percent to $59.12. US crude for July delivery rose 36 cents to $69.50 as gasoline demand remained strong despite high prices.
On the economic front, the US Labour Department said jobless claims for unemployment benefits unexpectedly fell to 295,000 last week. Growth in factory activity in the mid-Atlantic region eased in June, though it was still above expectations, according to the Federal Reserve Bank of Philadelphia. A separate report showed an unexpected decline in US industrial output for May.
Trading was active on the New York Stock Exchange as it instituted trading curbs on the upside. Advancing shares beat decliners by about 4 to 1 on both the Nasdaq and New York Stock Exchange. About 1.9 billion shares were traded on the NYSE, above the 1.61 billion daily average for last year. On Nasdaq, about 2.3 billion shares changed hands, above the 1.8 billion daily average last year.