Specialists William Bott, left, Christian Sanfilippo, third from left, and floor official Chris Casaliggi second left, work Thursday on the floor of the New York Stock Exchange.
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NEW YORK — An unexpected drop in unemployment claims and signs of progress in Europe's debt crisis pushed stocks higher in afternoon trading Thursday. The gains came a day after the Dow Jones industrial average dropped nearly 400 points.
The Dow was up 171 points, or 1.5 percent, at 11,952 as of 1:25 p.m. Eastern. It plunged 389 points Wednesday after Italy's borrowing rates soared to a dangerous level and talks in Greece on naming a new prime minister broke down.
The S&P 500 index gained 16, or 1.3 percent, to 1,246. The Nasdaq composite rose 18, or 0.7 percent, to 2,639.
Wednesday's losses were the worst for the stock market since the volatile trading in August. Traders are concerned that debt troubles in Italy and Greece could spread to the U.S. and lead to a global crisis.
Those worries eased Thursday after Italy sold $6.8 billion worth of debt at rates that were more favorable than analysts expected. Italy's benchmark borrowing rate dropped below 7 percent after spiking above that level the day before. Investors were also relieved by talk that the economist Mario Monti is likely to replace Premier Silvio Berlusconi, who was seen as an obstacle to meaningful economic reforms. Italy's president pledged that Berlusconi will step down soon.
The Labor Department reported early Thursday that the number of people making first-time applications for unemployment benefits fell to 390,000 last week. That figure, along with the four-week average, were the lowest since April. The drop in people applying for unemployment is a sign the job market may be improving.
Peter Cardillo, chief market economist at Rockwell Global Capital, called the drop in unemployment claims and the news from Europe encourging. "It's got the markets on the cheerful side," he said.
There were also signs of progress in Greece, the other focus of Europe's debt crisis. A day after a breakdown in power-sharing talks in Greece jolted financial markets, senior banker Lucas Papademos was named prime minister of a new coalition government. Papademos, a former vice president at the European Central Bank, is tasked with passing austerity measures being demanded by international lenders.
Cardillo said he's sure Europe won't fall apart and that Italy won't default on its debt, if only because the fallout would be disastrous. The U.S. and other countries would be forced to rescue Europe. "If Italy was to fail, you can rest assured Europe would fail and the global economy would fail," he said. "The U.S. is in a global economy. Whatever happens in one part of the globe is no longer isolated."
In corporate news:
- Cisco Systems Inc. rose 7.2 percent after its quarterly results beat Wall Street's estimates.
- Green Mountain Coffee Roasters Inc. plunged 37 percent after its revenues fell short of analyst expectations.
- Viacom Inc., owner of MTV Networks and Comedy Central, rose 7.5 percent after it earned more than analysts predicted. Most of the increase came from its Paramount Pictures division.