Stocks resume rally following strong earnings globally, fall in jobless claims

Stocks climb on earnings, drop in jobless claims

NEW YORK — Stocks rose Thursday after a new batch of upbeat earnings and a modest drop in jobless claims renewed some optimism about the economy.

Southwest Airlines Co., ExxonMobil Corp., Avon Products Inc. and Sony Corp. topped forecasts. Strong earnings worldwide gave European markets a lift. U.S. markets have received a boost over the past couple of weeks because of largely better-than-expected earnings and hopeful corporate forecasts for future growth.

A drop in initial jobless claims also boosted hopes for a recovery. Though the Labor Department said claims only fell modestly, any decline is uplifting because unemployment remains high. The drop was slightly better than economists had forecast.

Analysts widely agree that new hiring would spark a stronger recovery. Signs of a sharp pickup in job creation would boost consumer confidence and drive retail sales higher, a key component of economic activity.

Economic reports in recent months have pointed to a slowdown in growth, countering optimism seen by company executives. The Federal Reserve said in its beige book report Wednesday that the recovery in some regions of the country was weakening. The confirmation by the Fed that a slowdown is occurring helped snapped a four-day winning streak for the Dow Jones industrial average.

The Labor Department said new claims for jobless benefits fell to 457,000 last week. That’s slightly better than the 459,000 forecast by economists polled by Thomson Reuters.

In early morning trading, the Dow Jones industrial average rose 85.60, or 0.8 percent, to 10,582.57. The Standard & Poor’s 500 index rose 9.77, or 0.9 percent, to 1,115.90, while the Nasdaq composite index rose 17.32, or 0.8 percent, to 2,281.88.

Southwest reported better-than-expected results after heavy traffic to start the summer travel season. ExxonMobil got a boost from rising oil prices during the quarter. Beauty products seller Avon got a boost from sales in Europe and Latin America.

Electronics maker Sony Corp. also reported strong earnings because of a jump in sales of televisions and PlayStation 3 gaming consoles.

Colgate-Palmolive’s earnings beat forecasts, but revenue fell short of expectations. It also said it would take a bigger charge than it first thought because of Venezuela devaluing its currency.

Strong earnings and outlooks helped stocks overseas. European indexes all jumped following strong earnings from pharmaceuticals company AstraZeneca PLC, drug and materials company Bayer AG and telecommunications companies BT PLC and France Telecom SA.

Moody’s Investors Service said ratings on banks in Europe would not be affected following tests by regulators on the continent to determine whether banks would survive a further economic slowdown. Only seven of 91 banks failed the test, providing assurances that the financial sector in Europe is stronger than previously thought.