Wall Street rallied as solid earnings reports including from Walt Disney and a larger-than-expected drop in weekly jobless claims provided reassurance that the world's largest economy is firing on enough cylinders after all.
US jobless claims declined by 20,000 to 331,000 in the period ended February 1, according to Labor Department data. It was positive news a day after the ADP data showed US private employers added a somewhat disappointing 175,000 jobs in January, while December's gain in jobs was revised lower to 227,000, down from the initially reported 238,000.
"The underlying momentum in the labour market remains positive and it is very likely that this is the narrative that we get from tomorrow's employment report," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters.
Friday's Labor Department report is forecast to show nonfarm payrolls increased 184,000 in January, while the unemployment rate held steady at 6.7 per cent.
Even so, the extremely cold winter weather might have slowed job growth again, making it harder to get a true picture of the US labour market.
In afternoon trading in New York, the Dow Jones Industrial Average rose 0.96 per cent, the Standard & Poor's 500 Index added 1.03 per cent and the Nasdaq Composite Index climbed 1.08 per cent.
Shares of Walt Disney rallied, last up 5.1 per cent, leading gains in the Dow. The company posted a quarterly profit that beat expectations, bolstered by the success of its animated movie "Frozen".
"We had an incredibly strong first quarter," Robert Iger, Walt Disney chairman and CEO, said in a statement. "These results reflect the strength of our unprecedented portfolio of brands, a constant focus on creativity and innovation, and the continued success of our long-term."
However, it was a different story for Twitter. Its shares tanked, last 21.8 per cent lower, amid disappointment about slowing momentum of its user growth.
"A lack of mainstream adoption or a more simplified use case was a worry of ours coming out of the IPO and seems to have come to the fore faster than we had anticipated," UBS analyst Eric Sheridan said in a note, according to Reuters.
So far, nearly two-thirds of the S&P 500 have reported earnings this season, with 77 per cent surpassing estimates for profit and 66 per cent beating sales projections, according to Bloomberg News.
Shares of Coca-Cola gained, last up 1.4 per cent, after the company agreed to buy 10 per cent of Green Mountain Coffee Roasters for about US$1.25 billion. Shares of Green Mountain soared, last up 31 per cent.
In Europe, the Stoxx 600 Index finished the session with a 1.5 per cent advance from the previous close, as did Germany's DAX. The UK's FTSE 100 added 1.6 per cent, while France's CAC 40 gained 1.7 per cent.
Policy makers of the European Central Bank kept rates steady, shifting the rate focus to March. President Mario Draghi said he saw no signs of deflation.
"The risks surrounding the economic outlook for the euro area continue to be on the downside," Draghi said in a statement. "Developments in global money and financial market conditions and related uncertainties, notably in emerging market economies, may have the potential to negatively affect economic conditions. Other downside risks include weaker than expected domestic demand and export growth and slow or insufficient implementation of structural reforms in euro area countries."