NEW YORK (AP) -- Stocks soared Thursday after applications for unemployment benefits fell to a five-month low and Germany voted to expand the powers of Europe’s bailout fund. The Dow Jones industrial average shot up nearly 170 points.
Banks, which would have the most to lose if Europe’s debt crisis gets worse, rose more than the rest of the market. JPMorgan Chase & Co. jumped 4.3 percent, the most of any stock in the Dow.
Several strong reports on the U.S. economy encouraged investors to buy stocks. First-time applications for unemployment benefits fell last week to 391,000. That’s the lowest level since April 2 and also the first time applications have fallen below 400,000 since Aug. 6. The big drop suggests that layoffs are decreasing.
The government also raised its estimate of economic growth in the April-June period. The Commerce Department said the economy grew at a 1.3 percent annual rate in the second quarter, up from its previous estimate of 1 percent. It attributed the increase to growth in consumer spending and trade.
“This gives us a little more confidence that maybe the economy will muddle through here as we go through all these challenges,” said Rob Lutts, president and chief investment officer of Cabot Money Management.
The Dow Jones industrial average jumped 168 points, or 1.5 percent, to 11,178 at 12:15 p.m., erasing its loss from the day before.
The Standard & Poor’s 500 index rose 19 points, or 1.6 percent, to 1,170. All 10 company groups that make up the S&P rose.
Bank stocks rose sharply as worries eased about Europe’s debt problems. Morgan Stanley rose 5.7 percent. Genworth Financial Inc. soared 7.2 percent, the most of any company in the S&P 500 index. Janus Capital Group Inc. rose 5.4 percent.
The Nasdaq composite index rose 5, or 0.2 percent, to 2,497.
The measure approved by German lawmakers to expand the region’s bailout fund must be approved by all 17 countries that use the euro. The plan will allow the bailout fund to buy government debt and lend money to troubled European countries. Finland approved the measure Wednesday.
Analysts cautioned that the gains could quickly disappear if Europe stumbles in its efforts to contain its debt crisis.
“Investors need to be very careful, because there is still a vast labyrinth of potential challenges that remain to be cleared with regard to Europe,” said Frank Barbera, a portfolio co-manager of the Sierra Core Retirement Fund.
Advanced Micro Devices Inc. fell 12.6 percent, the most of any stock in the S&P 500, after the company cut its revenue and earnings forecast for the third quarter, saying it was having problems getting its chips made.
© 2011 The Associated Press