Stocks rise on good news for jobs, debt crisis

Stocks closed higher Thursday after unemployment claims unexpectedly dropped and worries over the debt crisis in Europe eased.

Greece named a new prime minister Thursday and Italy borrowed $6.8 billion at lower interest rates than analysts expected. Italy's benchmark rate dropped below 7 percent after spiking above that level Wednesday.

The Dow Jones industrial average closed with a gain of 113 points, or 1 percent, to at 11,893.9. It had plunged 389 points Wednesday as talks in Greece to name a new prime minister broke down. The Standard & Poor's 500 index gained 10.6, or 0.9 percent, to 1,239.7. The Nasdaq composite rose 3.5 points, or 0.1 percent, to 2,625.1.

Two stocks rose for every one that fell on the New York Stock Exchange. Trading volume was below average at 3.9 billion.

In Italy, word was afoot that leading economist Mario Monti could replace Prime Minister Silvio Berlusconi, who was seen as an obstacle to meaningful economic reforms. Italy's benchmark borrowing rate eased back below 7 percent after spiking above that level the day before.

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, banker Lucas Papademos, 64, 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.

In the United States, the number of applications for unemployment benefits fell to 390,000 last week. That was the lowest level since mid-April and a sign that the job market may be improving. Economists had expected 400,000 applications.

In a comment on the stock recovery, Mike Ryan, Manhattan-based chief investment strategist at UBS Wealth Management Americas, said in a telephone interview with Bloomberg News. "We're all headline watching. While politics and policy are constructive, I'm not so sure this is the end game. There's still noise that will come out. I don't view this as a critical turning point for the markets." His firm oversees $715 billion.

In addition, the credit ratings for France have not been downgraded by Standard & Poor's, the company said Thursday, clarifying what it says was an accidental transmission of a message to some subscribers that it had downgraded French credit.

In a statement, S&P says a technical error caused the automatic dissemination of a message to some subscribers of its Global Credit Portal "suggesting that France's credit rating had been changed."

S&P says that is not the case and France's ratings remain at AAA, the highest investment-grade rating, with a stable outlook.