Wall Street roars back but selling may not be over

S&P and Nasdaq also close higher Thursday

Traders Robert Vella, left, and Peter Tuchman work on the floor of the New York Stock Exchange Thursday.

NEW YORK —  U.S. stocks shot up 4 percent or more Thursday as investors hungry for bargains overcame the recent wave of fear that has driven selling over the last two weeks.

Thursday’s rally marked the second bounce in a yo-yo week. After a sell-off that has pushed the S&P 500 down as much as 17 percent since July 22, the market is showing some signs of regaining its footing.

“It’s a bungee cord market. We’ve fallen off of a small bridge, the bungee cord bounced us up, and oscillations will diminish, but we’re stil bouncing around,” said Fred Dickson, chief market strategist, D.A. Davidson & Co. Lake Oswego, Oregon.

Investors used results from Cisco and a slight dip in weekly U.S. jobless claims as the catalyst to snap up beaten-down stocks. Worries about the spread of the European debt crisis were also somewhat alleviated after news of a meeting between France’s Nicholas Sarkozy and Germany’s Angela Merkel set for Tuesday.

Financials outpaced other S&P sectors after leading losses in the previous session, but analysts said they still awaited a bottom for the recent correction that has taken the S&P 500 down more than 14 percent since its April 29 highs.

However, bank borrowing costs were under some pressure overseas.

The CBOE Volatility Index , known as the VIX, shed about 8 percent, but remained near levels not seen in over a year, while the day’s trading volume was at 12.88 billion, well above the year’s estimated daily average of 7.8 billion.

The Dow Jones industrial average surged 423.37 points, or 3.95 percent, to 11,143.31. The Standard & Poor’s 500 Index shot up 51.88 points, or 4.63 percent, to 1,172.64. The Nasdaq Composite Index  jumped 111.63 points, or 4.69 percent, at 2,492.68.

While indexes showed solid gains on Thursday, the S&P 500 has fallen for 11 of the past 14 sessions, indicating the selling pressure may not yet be exhausted.

“The trend is downward now. We’re having a big up day, but it’s been very volatile. We’ve been up against resistance for a little while in the 1,170 level in the S&P 500 ... our next level I believe is 1,188,” said Stephen J Guilfoyle, U.S. economist for Meridian Equity Partners and institutional sales trader on the NYSE floor.

Among sectors, the S&P financial index jumped 6.3 percent, while the semiconductor index gained 5.2 percent. Another top advancer was the Dow Jones Transportation Average , up 4.3 percent.

Labor Department data showed new U.S. claims for unemployment benefits dropped to a four-month low last week, a dose of better news for the market after last week’s U.S. credit-rating downgrade and a recent spate of soft economic data.

Shares of Cisco leaped 16 percent to $15.92.