NEW YORK (Reuters) - U.S. stocks rebounded from two days of losses to close higher on Thursday, helped by financial sector earnings, while stronger-than-expected economic data boosted the dollar and bond yields.
The dollar .DXY was up 0.5 percent after a three-day slide against a basket of currencies, on track for its biggest gain since Sept. 30. after a rise in September core U.S. consumer prices. The data also pushed up U.S. Treasuries yields slightly, as it renewed some hopes for a 2015 Federal Reserve interest rate hike.
In addition, the number of Americans filing new applications for unemployment benefits fell back to a 42-year low last week, suggesting the labor market remained strong despite an abrupt slowdown in job growth in the past two months.
"It's a stronger economy day. Unemployment claims were very good at the lowest in 42 years, suggesting the labor market is OK," said Daisuke J. Nakajima, managing director and economist at Evercore ISI Group in New York.
U.S. stocks were helped by strength in some third-quarter earnings reports, led by the benchmark S&P 500's financial sector .SPSY, which closed up 2.3 percent for its best day in more than a month. Citigroup (C.N) was a big driver with a 4.4 percent rise after it beat estimates.
Of the companies that reported earnings so far this season, 67 percent have exceeded analyst estimates, compared with 49 percent in a typical quarter, according to Thomson Reuters data.
But Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis, said the stocks boost was just a rebound, as none of the fundamentals "have been decisive enough to take you away from the technical battle that's going on."
The Dow Jones industrial average .DJI rose 217 points, or 1.28 percent, to 17,141.75, the S&P 500 .SPX gained 29.62 points, or 1.49 percent, to 2,023.86 and the Nasdaq Composite .IXIC added 87.25 points, or 1.82 percent, to 4,870.10.
"There's a lot of cash on sidelines, and we did break through to a new high since the August decline," said Tim Ghriskey, chief investment officer of Solaris Group in Bedford Hills, New York.
Oil prices settled down for the fourth straight day as the U.S. government reported a larger-than-expected crude stockpile build. However, after settling down 0.6 percent at $46.38, though above its session lows, U.S. crude rose 0.3 percent in late trade, helped by the equities rally.
"We were trading according to supply-demand fundamentals earlier in the day. But toward the close, it was the risk-on, macro trade, with money flowing into riskier assets such as stocks and commodities," said Chris Jarvis, analyst at Caprock Risk Management in Frederick, Maryland.
Brent oil futures settled down 0.9 percent at $48.11 a barrel. Other commodities were mixed, with gold XAU= down 0.2 percent while copper CMCU3 was up 0.2 percent.
MSCI's emerging share index .MSCIEF was up 1.8 percent after a two-day fall and hit its highest level since Aug. 13.
"People's fears of a global slowdown are maybe bottoming out," Paulsen said.
Additional reporting by Barani Krishnan, Caroline Valetkevitch, Sam Forgione and Richard Leong in New York; Editing by Nick Zieminski, Meredith Mazzilli and Dan Grebler