Stocks rallied strongly Thursday as some investors grew more confident about the economy’s prospects despite the effects of hurricanes Katrina and Rita.
That sentiment also filtered into the Treasury bond market, pushing yields higher as investors bet the Federal Reserve would continue to tighten credit.
The 10-year Treasury note, a benchmark for mortgages, ended at 4.30%, up from 4.26% on Wednesday and the highest since Aug. 11.
The two-year T-note finished at 4.13%, up from 4.07% on Wednesday. The yield now is just below the four-year high of 4.15% reached Aug. 8.
Wall Street overlooked higher interest rates and another rise in oil and natural gas prices, and drove the Dow Jones industrial average up 79.69 points, or 0.8%, to 10,552.78. Some broader indexes posted bigger gains on the second-to-last trading day of the third quarter.
The government said new claims for unemployment benefits fell 79,000 to 356,000 last week. About 60,000 claims came from people who lost their jobs because of Katrina, down from 108,000 the week before. Economists had expected 418,000 claims in all.
“The message from these numbers is the labor market has not shown any broad-based deterioration in the aftermath of Katrina,” said Haseeb Ahmed, an economist at brokerage JPMorgan Chase.
That helped to embolden investors who have been reluctant to step up and buy stocks in recent days. Winners topped losers by more than 2 to 1 on the New York Stock Exchange.
The Standard & Poor’s 500 index rose 10.79 points, or 0.9%, to 1,227.68, its biggest one-day gain since Sept. 6.
The technology-heavy Nasdaq composite gained 25.82 points, or 1.2%, to 2,141.22.
Still, some analysts were skeptical that the market could mount a sustained uptrend in the near term, with energy prices continuing to rise and with many investors nervous about third-quarter corporate earnings.
“It’s a trading rally, and not much more than that,” said Hugh Johnson, investment chief at Johnson Illington Advisors.
In commodities trading, near-term oil futures rose 44 cents to $66.79 a barrel in New York, and natural gas futures hit a record, up 9.6 cents to $14.20 per million British thermal units.
But gasoline futures fell 8.8 cents to $2.25 a gallon on expectations that rising imports will help make up for output lost from refineries damaged by the hurricanes.
In other market highlights:
* Fannie Mae rallied $3.18, or 7.6%, to $44.89, recouping much of its $4.99-a-share plunge on Wednesday.
Dow Jones reported Wednesday that a probe of the mortgage financier turned up “new and pervasive accounting violations,” but some analysts said a previously estimated $10.8-billion earnings restatement may only require a small increase after the new report.
* Red Hat helped lead tech shares higher. The stock soared $4.93 to $21.44 after the biggest distributor of Linux computer software said it expected sales of as much as $71.5 million and profit of 9 cents to 10 cents a share this quarter, beating Wall Street’s estimates.
But Research in Motion, maker of the BlackBerry e-mail pager, sank $7.25 to $70. The company said that second-quarter profit rose 57%, but subscriber additions missed some analysts’ estimates.
* Investors snapped up Internet-related shares including EBay, up $2.37 to $41.30; Google, up $3.62 to $309.62; and Yahoo, up $1.11 to $33.46.
* In the healthcare sector, Guidant fell $2.07 to $68.17 on worries about a government probe into how the company handled problems with an implantable heart device.
Amerigroup plunged $14.10 to $19.81. The manager of government healthcare plans for the poor warned that rising medical costs would mean weaker-than-expected earnings.