By Sinead Carew
NEW YORK (Reuters) - U.S. stocks climbed back on Thursday after a massive sell-off the day previous, with strong earnings encouraging investors to venture into risky bets again, while the dollar gained on the euro.
Oil prices were bolstered by the rebound in equities markets and as Saudi Arabia's energy minister signalled major producers may need to intervene in crude markets to support prices.
The euro fell to a two month low after European Central Bank chief Mario Draghi reaffirmed that the bank's 2.6-trillion euro ($2.97 trillion) asset purchase program will end this year and interest rates could rise after next summer, even though the economic outlook has darkened and political turmoil looms in Italy.
While equity investors were reassured by positive earnings from Microsoft Corp and strong advertising revenues from Twitter Inc they also voiced some caution about whether the broader pullback was over.
"You can't look at it blindly and say earnings are turning the market around and we're all clear. A lot of people are sceptical of any kind of action in the market right now, especially to the upside. That's why volume is light today," said Robert Pavlik, chief investment strategist, senior portfolio manager at SlateStone Wealth LLC in New York.
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Even the most optimistic investors were cautious.
"Quarterly reports are providing better-than-expected earnings, revenue and guidance. That triple play is instilling confidence in investors," said Peter Kenny, founder of Kenny's Commentary LLC.
But, he added, "We need other drivers to provide stability to the market after this meaningful sell-off we've seen in the last five weeks."
Investors are looking for further strong results for the remaining two thirds of S&P 500 companies that are yet to report, as well as a resumption of share buybacks by companies that have already reported.
They are also awaiting third-quarter U.S. GDP data that is due out on Friday. If the reading is lower than expectations investors will worry about economic growth but if it is much higher they will fear a faster pace of U.S. interest rate hikes, Kenny said.
The Dow Jones Industrial Average rose 401.13 points, or 1.63 percent, to 24,984.55, the S&P 500 gained 49.47 points, or 1.86 percent, to 2,705.57 and the Nasdaq Composite added 209.94 points, or 2.95 percent, to 7,318.34. [.N]
In the previous day's session the indexes had plunged, confirming a correction for the Nasdaq as disappointing forecasts from chipmakers and weak home sales data had fuelled jitters about economic and profit growth.
During its trading day, the pan-European STOXX 600 had darted in and out of positive territory before closing up 0.51 percent, while the MSCI's gauge of stocks across the globe gained 0.75 percent.
The dollar index rose 0.17 percent, with the euro down 0.17 percent to $1.1372.
Draghi said he was confident the European Commission and Rome would come to a compromise over Italy's budget plans, but the euro had reversed earlier gains after he said the monetary union remained fragile.
Currency dealers were also unwinding Swiss franc and Japanese yen safety trades and Italian and Spanish bonds held their ground.
The Japanese yen weakened 0.15 percent versus the greenback at 112.43 per dollar, while Sterling was last trading at $1.2816, down 0.50 percent on the day.
MSCI's broadest index of Asia-Pacific shares outside Japan closed 1.24 percent lower, while Japan's Nikkei lost 3.72 percent.
U.S. Treasury yields rose from three-week lows as equities gained, though anxiety about ongoing stock volatility continued to give some support to safe-haven U.S. government debt prices.
Benchmark 10-year Treasuries last fell 1/32 in price to yield 3.1262 percent, from 3.124 percent late on Wednesday.
U.S. crude rose 0.25 percent to $66.99 per barrel and Brent was last at $76.63, up 0.6 percent on the day.
Spot gold dropped 0.1 percent to $1,231.82 an ounce due to the strong dollar and the equities rebound.
Graphic - Nearly $7 trillion wiped off world stocks: https://tmsnrt.rs/2ONOPwD
Graphic - Global assets in 2018: https://bsmedia.business-standard.comtmsnrt.rs/2jvdmXl
Graphic - World FX rates in 2018: http://tmsnrt.rs/2egbfVh
Graphic - Emerging markets in 2018: http://tmsnrt.rs/2ihRugV
Graphic - MSCI All Country World Index Market Cap: http://tmsnrt.rs/2EmTD6j
(Additional reporting by Caroline Valetkevitch in New York, Amy Caren Daniel in Bengaluru, Kate Duiguid in New York, Marc Jones and Christopher Johnson in London and Swati Patel in Sydney; editing by Larry King and Nick Zieminski)