US shares resumed their rally on Thursday as the market was energized by an earnings report from aluminum maker Alcoa showing a surprise return to profit.

The Alcoa report, the first from a blue-chip firm for the third quarter, offered hope that companies are regaining health as the economy improves.

The Dow Jones Industrial Average climbed 61.29 points (0.63 percent) to close at 9,786.87 as Wall Street joined the rally that began in overseas markets.

The tech-heavy Nasdaq advanced 13.60 points (0.64 percent) to 2,123.93 and the broad Standard & Poor's 500 index increased 7.90 points (0.75 percent) to 1,065.48.

Patrick O'Hare at Briefing.com said Alcoa's report "kicked more than a few short sellers in the mouth as the aluminum maker said mostly all the right things."

The company said its net income was 77 million dollars or eight cents a share in the quarter ended September, after three losing quarters, surprising analysts who had expected a fourth straight quarterly loss.

O'Hare said Alcoa also offered an upbeat outlook for aluminum consumption, another sign of an improving global economy.

"Don't call attention to the fact that demand is still nowhere what it used to be," he said.

"Instead, emphasize that there is growth now from a very depressed base."

The market was also encouraged by news that initial claims for US jobless benefits in the week ended October 3 fell to a nine-month low of 521,000, another encouraging sign.

The report "reaffirms that labor market conditions are improving," said Michael Bratus at Moody's Economy.com.

The Dow and S&P flirted with new highs for the year before giving back some gains late in the session.

Nick Perry at Schaeffer's Investment Research said the market action is encouraging.

The trends "support the idea that buyers are still willing to step in" on market declines. "As they stand now, the Dow and S&P 500 have recouped much of the recent dip and are in a position to potentially challenge their September highs."

European markets also gained amid heightened investor confidence on prospects for a sustained recovery.

The London FTSE 100 index added 0.90 percent to reach 5,154.64 while in Paris the CAC 40 rose 1.34 percent to 3,806.81. The Frankfurt DAX gained 1.34 percent to reach 5,716.54.

Among stocks in focus on Wall Street, Alcoa rose 1.06 percent to 14.35 dollars, extending its rally of more than 10 percent this week.

PepsiCo, which also reported earnings, fell 1.28 percent to 60.39 dollars after the beverage and snacks maker reported a better-than-expected profit of 1.72 billion dollars but said it is "still feeling the pinch of the global recession."

Elsewhere, retail giant Target rose 1.71 percent to 49.34 dollars after reporting monthly same-store sales fell, but not as much as anticipated.

Other retailers also rallied on positive monthly sales data: Abercrombie & Fitch jumped 5.51 percent to 34.46 dollars and Macy's leapt 5.06 percent to 19.53 dollars.

Bonds slipped. The yield on the 10-year US Treasury bond rose to 3.255 percent from 3.175 percent Wednesday and that on the 30-year bond increased to 4.094 percent from 3.992 percent. Bond yields and prices move in opposite directions.

AFP