S&P 500 climbs to four-year high as ECB details bond-buying plan

Better than expected employment reports and a new effort to deal with the European economic crisis sent stock prices sharply higher on Thursday.

The Dow Jones Industrial Average rose 244.52 points to the highest level since December 2008. The Nasdaq gained 66.55 points, 2.2 percent, to 3,135.81, the highest close since November 2000, and the S&P 500 Stock Index was up 28.68 points to 1,432.12, finishing at the highest level since January 2008.

A surprising report from ADP showed civilian payrolls rose by 201,000 in August, and initial claims for jobless benefits fell by 12,000 to 365,000 in the week ended Sept. 1. The official Department of Labor report on August employment will be released before the start of trading on Friday.

Commodities were slightly higher. Gold gained $11.60 to $1,705.60 an ounce. Oil was up 17 cents to $95.63 a barrel.

JPMorgan Chase & Co. (NYSE: JPM), Bank of America Corp. (NYSE: BAC) and Cisco Systems Inc. (Nasdaq: CSCO) jumped at least 4.2 percent, leading gains in the Dow Jones Industrial Average. All 10 S&P 500 groups increased as Alcoa Inc. (NYSE: AA) and Owens-Illinois Inc. (NYSE: OI) climbed more than 2.8 percent to pace advances among raw-material shares. Chip-maker SanDisk Corp. (Nasdaq: SNDK) rallied 8.4 percent after OCZ Technology Group Inc. (Nasdaq: OCZ) blamed a shortage of certain flash-memory components for lower-than-estimated sales.

“We are in a period where we are peeling away the onion little by little, all the uncertainties, what’s going to happen in Europe and what’s going to happen here,” said Dan Veru, chief investment officer at Palisade Capital Management LLC in Fort Lee, N.J. His firm oversees $3.5 billion. “I think Draghi is serious about putting Europe on the positive path.”

European Central Bank President Mario Draghi said policymakers agreed to an unlimited bond-purchase program as they try to regain control of interest rates in the euro area. He said the ECB will have a “fully effective backstop to avoid destructive scenarios with potentially severe challenges for price stability.” The bond plan is the most ambitious yet in the central bank’s fight to save the euro after nearly three years of turmoil.

“The market was looking for signs that the ECB and some part of the European Union would basically stimulate in Europe and guarantee the sovereign debt,” said David Pearl, who oversees $24 billion as co-chief investment officer at New York-based Epoch Investment Partners. “Draghi pretty much gave what the market was looking for. The U.S. data is at least moving positively, and we’re in a recovery.”

Thursday’s rally helped the S&P 500 break out of a 19-point trading range for the index’s close since Aug. 7. The gauge spent the past four weeks hovering around 1,400 as investors awaited policy clues from central banks. Federal Reserve Chairman Ben Bernanke said in Jackson Hole, Wyo., last week that he wouldn’t rule out more stimulus.

“There’s a lot of buying, it’s really across the board,” said Laszlo Birinyi, president of Birinyi Associates Inc. in Westport, Conn. “When you have this much breadth, it’s a very positive sign.”

Birinyi, who advised clients to buy stocks before the S&P 500 hit a 12-year low in March 2009, said an advance in the index this year to “1,500 is a very achievable target.”

The index has rallied 12 percent from a June low amid optimism that central banks worldwide will act to spur growth and as corporate earnings beat analysts’ estimates.

Amazon.com Inc. (Nasdaq: AMZN) added 2.1 percent to a record $251.38. The company is updating its line of Kindle e-readers and tablets in a bid to stoke consumer demand as Google Inc. (Nasdaq: GOOG) and Microsoft Corp. (Nasdaq: MSFT) join the crowded market of machines challenging Apple Inc.’s (Nasdaq: AAPL) iPad.

Navistar International Corp. (NYSE: NAV) climbed 17 percent to $23.97. The company reported third-quarter results that topped analysts’ estimates. Lewis Campbell, who became interim chief executive officer after Dan Ustian was ousted amid an inquiry from regulators, said he expects “significant improvements” in the next 12 to 18 months.

First Solar Inc. (Nasdaq: FSLR) jumped 7.4 percent to $20.03. The maker of thin-film photovoltaic panels won a contract to supply 25 megawatts for a project that Green Infra Ltd. is developing in India.