U.S. stocks stage late-day rally

By Herbert Lash

NEW YORK (Reuters) - U.S. stocks staged a late-day rally on Thursday on renewed hopes that earnings will remain strong, while rebounding equities and news of surging growth in China, the No. 2 energy consumer, helped lift crude prices.

The turn in sentiment came before International Business Machines (IBM.N), the biggest contributor to the Dow's rise, was set to report results after the closing bell.

Wall Street rallied, with the benchmark Standard & Poor's 500 index posting the best four days since late March, when the S&P 500 recovered from a 12-year low set earlier in the month.

"Investors have ratcheted up expectations for earnings almost across the board, so that optimism is still there even if today's action is rather muted," said Paul Baiocchi, senior market strategist at Delta Global Advisors in San Francisco.

After the bell, IBM (IBM.N) posted better-than-expected quarterly results despite a sharp slide in revenue, while quarterly profits at Google Inc (GOOG.O) also were stronger than expected despite a tough advertising market.

The Dow Jones industrial average .DJI shot up 95.61 points, or 1.11 percent, to close at 8,711.82. The Standard & Poor's 500 Index .SPX advanced 8.06 points, or 0.86 percent, to 940.74. The Nasdaq Composite Index .IXIC rose 22.13 points, or 1.19 percent, to 1,885.03.

European shares hit a one-month closing high on improved sentiment following JPMorgan's results and data that showed the number of U.S. workers claiming new jobless benefits fell last week to their lowest since January.

The seasonally adjusted government data was again distorted by earlier layoffs in the automotive industry.