Stocks rallied late in the session on Thursday for the second day as enthusiasm about strong profits offset lingering credit concerns, although a modest flight-to-quality bid gave bond prices a slight lift.
Wall Street's burst of buying and higher finish extended a global stocks rally that lifted benchmark share indexes in most major markets from London to Paris and Frankfurt, and from Shanghai to Tokyo. These gains helped stocks recover from a 3-1/2-month low hit earlier this week as investors once again focused on the healthy profit outlook.
At about 4.30 pm ET, US Treasury bond prices gained moderately after the market got more bad news about the US subprime mortgage market.
The dollar gained ground against the yen, but dipped against the euro as some currency investors held back ahead of the week's biggest data release, the US July employment report due on Friday.
"There is a real contest going on in the capital markets ... between the equity crowd, who look correctly at very solid corporate economic and fundamental underpinnings and wonder whether this valuation should be reset by credit risk," said Jack Malvey, chief global fixed-income strategist with Lehman Brothers, in New York.
"On the other hand, there is a bond world where credit- risk reset has probably largely concluded, but there is a lot of post-storm damage," Malvey said, citing investors' concerns that there might be some additional hedge fund disclosures, which could put more pressure on credit markets.
Earnings have been overshadowed recently by worries about the global credit squeeze and its impact on stocks, especially mortgage and financial companies. That has led to several whipsaw sessions for stocks over the past few days.
Quick burst of buying
But in the final 30 minutes of Thursday's regular trading session, stock investors put worries about the US housing market and corporate debt to one side and pushed stocks abruptly higher.