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Stocks jump after China shows confidence in Europe

 A traders works on the floor at the New York Stock Exchange in Thursday, May 27, 2010, in New York.  (AP Photo/Seth Wenig)
 A trader works on the floor at the New York Stock Exchange Thursday, May 27, 2010, in New York. (AP Photo/Seth Wenig)
 Traders work on the floor at the New York Stock Exchange Thursday, May 27, 2010, in New York.  (AP Photo/Seth Wenig)

Wall Street

A traders works on the floor at the New York Stock Exchange in Thursday, May 27, 2010, in New York. (AP Photo/Seth Wenig)

Wall Street

A trader works on the floor at the New York Stock Exchange Thursday, May 27, 2010, in New York. (AP Photo/Seth Wenig)

Wall Street

Traders work on the floor at the New York Stock Exchange Thursday, May 27, 2010, in New York. (AP Photo/Seth Wenig)

Stocks surged Thursday after China reassured investors it doesn't plan to sell any of the European debt it holds.
The Dow Jones industrial average rose about 150 points in morning trading, while Treasury prices tumbled as traders pumped money into stocks.
China's confidence in Europe overshadowed disappointing reports about the U.S. economy. The Labor Department said initial claims for unemployment benefits fell last week, but not by as much as economists had forecast. A report on gross domestic product indicated that the U.S. economy did not grow as fast in the first quarter as previously thought.
Thursday's gains came after the agency that manages China's $2.5 trillion in foreign reserves denied a Financial Times report that China was considering cutting its exposure to European debt. Major indexes around the world also rose.
Concerns about debt problems in Europe have pounded stocks around the world this month. Traders were initially worried that banks would get hit if weaker countries like Greece, Portugal or Spain defaulted on their debt. Now that a nearly $1 trillion European Union rescue plan is coming together, the more recent fear has been that budget cuts in European countries will slow a global recovery.
The euro, which is seen as an indicator for confidence in the health of Europe's economy, rose to $1.2230. Trading in major markets around the world has often tracked the euro in recent weeks.
In midmorning trading, the Dow rose 145.55 points, or 1.5 percent, to 10,120.00. The Standard & Poor's 500 index jumped 18.47, or 1.7 percent, to 1,834.28, while the Nasdaq composite index surged 46.49, or 2.1 percent, to 2,242.37.
At the New York Stock Exchange, about 2,700 shares rose while only about 100 fell. Volume came to 131 million shares, compared with 172 million shares traded at the same point Wednesday.
Bond prices tumbled after traders looked for riskier assets like stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.32 percent from 3.19 percent late Wednesday.
The government said initial claims for unemployment benefits fell to a seasonally adjusted total of 460,000 last week. That's short of the drop to 455,000 that economists polled by Thomson Reuters had forecast.
High unemployment remains a stumbling block to a stronger recovery in the U.S. The unemployment rate rose to 9.9 percent last month.
A separate report said the nation's economy grew at an annual rate of 3 percent in the first three months of the year, worse than an initial government estimate of 3.2 percent growth. Economists had forecast that first-quarter GDP rose 3.4 percent.
Steady growth is welcome coming out of the recession but it still hasn't yet been enough to make a big dent in unemployment. Economists say growth would have to climb to around 5 percent for a year to cut the unemployment rate by 1 percentage point.
Even though stocks are higher in morning trading, early gains have not necessarily meant the market will remain strong throughout the day.
Twice this week, stocks have rallied early in the day only to see those advances erased in late-day selloffs. The Dow was up 135 points Wednesday morning, but ended the day down about 69 points. It was the Dow's eighth drop in the last 10 trading sessions.
The slide Wednesday afternoon was tied to the report questioning whether China would cut its holdings of euro-denominated bonds.
Stocks had been rising following two upbeat reports on the U.S. economy. April durable goods orders and new home sales both rose more than forecast.
The Russell 2000 index of smaller companies rose 14.07, or 2.2 percent, to 656.69.