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Stocks climb, pulling the Dow and S&P 500 back into positive territory for the year

Stocks climb, pulling the Dow and S&P 500 back into positive territory for the year
The facade of the New York Stock Exchange. (Spencer Platt / Getty Images)

U.S. stocks surged Thursday as strong earnings reports from market bellwethers such as Microsoft and Comcast gave a boost of confidence to investors shaken by the recent wave of selling.

The rally wiped out a large part of the market's drop from the day before, but stocks are still down sharply over the last three weeks.

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Technology firms rallied after reports from Microsoft and others, while Twitter and Comcast led the way for internet and media companies. Ford's results helped consumer-focused stocks.

Some encouraging economic news also helped stabilize markets. The Commerce Department said orders to U.S. factories for major manufactured goods grew in September, and the increase was larger than analysts expected.

The Standard & Poor’s 500 index climbed 49.47 points, or 1.9%, to 2,705.57. The Dow Jones industrial average rose 401.13 points, or 1.6%, to 24,984.55; earlier in the day, it was up as much as 520 points. The Nasdaq surged 209.94 points, or 3%, to 7,318.34 the day after suffering its biggest drop in seven years.

Stock trading turned volatile in October, with big sell-offs in the sectors that have powered the bulk of the gains during the market's long bull run. Even after Thursday's gains, the S&P 500 is down 7.5% since Oct. 3 as investors worry about climbing interest rates and the effects of the U.S.-China trade dispute. The Nasdaq has slid 8.8%.

Investors are worried that rising interest rates and disputes with trading partners could hurt economic growth and corporate profits. They will get more insight into how the U.S. economy is doing early Friday, when the government reports on third-quarter economic growth. Experts think the country's gross domestic product grew at a 3.3% annual pace in July through September, according to FactSet.

Microsoft beat analysts' forecasts for last quarter as it mined new revenue sources in online subscriptions, gaming and its LinkedIn professional networking service. Shares of the tech giant jumped 5.8% to $108.30.

“It's certainly reassuring to see stocks bounce back today on stronger earnings, but I would expect that we continue to see a lot of day-to-day volatility,” said Kate Warne, an investment strategist for Edward Jones.

Twitter soared 15.5% to $31.80 and electric car maker Tesla jumped 9.1% to $314.86 after their quarterly reports. Video game maker Take-Two climbed 8.8% to $120.70 after strong reviews for its latest game, “Red Dead Redemption 2.”

The S&P 500 suffered two six-day losing streaks this month and had fallen 13 of the last 15 days. That stretch included a couple of big rallies, but the losses erased the benchmark index's gains from earlier in the year. After Thursday's gains, the Dow and S&P 500 are each up about 1% for the year.

Earnings for S&P 500 companies have been growing at a clip of more than 20% this year, but much of that comes from last year's corporate tax cut, so it’s not expected to happen again next year. Investors expect earnings to keep rising, but they're not sure how much growth to expect, and that has contributed to the recent selling.

Those concerns could surface again as early as Friday. Investors didn't like what they heard from Amazon and Alphabet, which reported their results after the close of trading.

Warne said investors have been dumping shares of companies that reported weak results, while companies that surpassed expectations haven't been rewarded much. She expects that to change when the dust settles.

“When we get beyond earnings season and investors are wondering what now can drive the market higher or lower, knowing that we had a strong earnings season and companies did not lower their guidance very much will provide some support for stocks,” she said.

On Thursday the stock market looked the way it has looked for most of this year: High-tech and consumer-focused companies led the way while steadier, defensive stocks that pay big dividends didn’t do much or lost ground.

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Smaller, more U.S.-focused companies have also been sinking as Wall Street worries about future growth in the U.S. economy, which is tightly connected to their profits, as well as the possibility that rising interest rates will make it tougher for them to repay their debts.

The Russell 2000 index climbed 31.70 points, or 2.2%, to 1,500.40 on Thursday. It has fallen 13.8% since the end of August and is down 2.3% so far this year.

In Europe, European Central Bank President Mario Draghi said the region's economy is still growing at a solid clip even though there are signs it has weakened somewhat recently. But Asian markets took big losses, as the U.S. market did the day earlier.

Major stock indexes in Europe climbed, though WPP, the world's largest advertising company, said its business slowed in the third quarter and warned about weaker annual earnings. U.S.-traded shares of WPP fell 17.3% to $57.90.

U.S. bond prices were little changed. The yield on the 10-year Treasury note remained at 3.12%.

Benchmark U.S. crude rose 0.8% to $67.33 a barrel. Brent crude, the benchmark for international oil prices, rose 0.9% to $76.89 a barrel.

Wholesale gasoline fell 0.5% to $1.81 a gallon. Heating oil rose 1.2% to $2.28 a gallon. Natural gas rose 1.1% to $3.20 per 1,000 cubic feet.

Gold rose 0.1% to $1,232.40 an ounce. Silver fell 0.3% to $14.63 an ounce. Copper fell 0.1% to $2.75 a pound.

The dollar rose to 112.61 yen from 112.44 yen. The euro fell to $1.1359 from $1.1387.

3:45 p.m.: This article was updated with closing prices, context and analyst comment.

1 p.m.: This article was updated with the close of markets.

This article was originally published at 9:15 a.m.

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