Investors have been grasping at any sign of improvement in the crippled banking industry, and Wells Fargo's report Thursday that it expects first-quarter earnings of $3 billion provided an encouraging sign that a deep freeze in borrowing activity may finally be thawing. Wells Fargo said it benefited from its January acquisition of Wachovia and an increase in mortgage applications.
"The fact that Wells Fargo can have record profits despite the troubles facing the banking system tells you something," said Rick Campagna, chief investment officer at 300 North Capital in Pasadena, California. "It's very good news."
In the final hour of trading, the Dow Jones industrial average rose 225.96, or 2.9 percent, to 8,063.07. It was the blue chips' first trade over the 8,000 mark since Monday.
Broader stock indicators also jumped. The Standard & Poor's 500 index rose 26.87, or 3.3 percent, to 852.03, while the Nasdaq composite index rose 54.73, or 3.4 percent, to 1,645.39.
The report from Wells Fargo injected a decisively upbeat tone into the market after three days of choppy trading earlier this week, when the market appeared to be taking a breather after barreling ahead more than 20 percent in March. Analysts see occasional pullbacks as signs of a healthy market as investors allocate money carefully instead of just following a frenzied crowd.
Bank shares had been sluggish this week following worrisome forecasts from key analysts about the bad loans they still carry on their balance sheets and other long-term woes. Major banks begin reporting first-quarter profits next week.
Wells Fargo jumped 27 percent Thursday and several other major banks also rose smartly, including Citigroup Inc., up 10.7 percent; JPMorgan Chase & Co. up 12.7 percent, and Bank of America Corp. up 31.2 percent.
Investors appeared unfazed by uneven monthly sales reports from retailers and mixed economic news.
Wal-Mart Stores Inc. reported lower-than-expected sales in March, sending its shares down 2.5 percent, making it one of the only stocks to fall among the 30 companies that make up the Dow.
Discount retailer Target Corp. rose 5.9 percent after posting results that topped expectations, while teen clothing retailer Abercrombie & Fitch Co. slid 4.3 percent after its numbers came in weaker than expected.
In economic news, new jobless claims fell more than expected last week, but those continuing to receive unemployment benefits set another high. The total number of laid-off Americans receiving unemployment rose to 5.84 million from 5.75 million, the most on record since 1967 and more than analysts expected.
The jump in stocks comes at the end of a relatively quiet holiday week, when markets will be closed for Good Friday.
Investors have been worried in recent days that the upcoming corporate earnings season could bring bad news about how companies expect the rest of the year to turn out. But the market's tone brightened somewhat on Wednesday on reports that the government will provide support for battered life insurers and a merger deal between two major homebuilders.
Ted Aronson, a partner at Aronson-Johnson-Ortiz in Philadelphia, said Wells Fargo's upbeat preview into its earnings could place a greater burden on banks reporting results next week. Wells Fargo doesn't report its full results until April 22.
"I'm not sure everyone will be as successful, but we'd like to hope that the success will spill over," Aronson said.
In other trading, the Russell 2000 index of smaller companies jumped 23.07, or 5.2 percent, to 465.19.