US STOCKS-Wall St flies on China comment, Microsoft upgrade

* China denies report on euro-zone holdings

* Microsoft climbs after FBR upgrade

* GDP grows at slower pace than previous estimate

* Dow up 2.9 pct, S&P up 3.3 pct, Nasdaq up 3.7 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Updates to close)

By Chuck Mikolajczak

NEW YORK, May 27 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) rallied on
Thursday as investor worry was eased after China refuted a
report that it was reviewing its euro-zone bond holdings due
to the region’s debt crisis.

Thursday’s gains marked the largest advance for the S&P
500 on a percentage basis since May 10, although volume was
below average.

China’s denial was enough of a catalyst to entice buyers
into the volatile equity market, which fell sharply from April
highs as investors worried that Europe’s debt woes would
spiral into a larger financial crisis.

“As you look through it, Europe is not getting worse,”
said Tim Holland, co-portfolio manager of the Aston/TAMRO
Diversified Equity Fund in Alexandria, Virginia. “Trees don’t
grow to the sky, but did the market deserve to be off 15
percent in three weeks?”

The People’s Bank of China said a Financial Times report
that Beijing was concerned about its euro-zone exposure was
groundless. The report had short-circuited a rally in the
previous session. For details, see [ID:nTOE64Q04P]

Microsoft Corp (MSFT.O: ) climbed 4 percent to $26, a day
after ceding its position to Apple (AAPL.O: ) as the largest
technology company by market cap. FBR Capital Markets upgraded
the Dow component to “outperform,” citing Microsoft’s
improving fundamentals and recent share underperformance.
[ID:nSGE64Q0CS]

The Dow Jones industrial average (.DJI: ) gained 284.54
points, or 2.85 percent, to 10,258.99. The Standard & Poor’s
500 Index (.SPX: ) advanced 35.11 points, or 3.29 percent, to
1,103.06. The Nasdaq Composite Index (.IXIC: ) jumped 81.80
points, or 3.73 percent, to 2,277.68.

Technology stocks also rebounded after having been
battered recently as a result of their higher concentration of
overseas sales. The PHLX Semiconductor index (.SOXX: ) jumped
5.2 percent.

“You get a macro stimulus and you look for those areas
that have pulled back hard and can give you some quick
returns. And that’s what you’re seeing today,” said Williams
Financial Group analyst Cody Acree, about Thursday’s chip
rally.

The S&P 500 closed above the 1,090 level it has failed to
breach in the last week, which is seen as technical
resistance.

Also being eyed by analysts as a significant indicator
would be a close above the 200-day moving average, which now
stand right above the 1,104 mark. [ID:nN2798414]

The CBOE Volatility Index (.VIX: ), or VIX, known as Wall
Street’s fear gauge, fell 15.3 percent to 29.68, continuing
its pattern of large swings since the S&P hit its April high.

“There is a debate in the markets going on right now
whether we are experiencing this sort of correction in a
longer term bull market in equities or are we having a sea
change in business prospects around the world — the
volatility demonstrates that debate,” said Michael Cuggino,
portfolio manager at Permanent Portfolio Funds in San
Francisco.

Data showing the U.S. economy grew at a slower pace than
expected in the first quarter was not enough to keep investors
from grabbing bargains after major indexes dropped more than
10 percent over the past month.

In other data released on Thursday, new applications for
state jobless benefits dropped to 460,000 last week from
474,000 in the previous week, the Labor Department said,
pointing to a gradual labor market recovery. [ID:nN27259780]

Dow component Pfizer Inc (PFE.N: ) rose 1.7 percent to
$15.37 after the drugmaker said it would stop recruiting
patients for a clinical trial for its heart drug Inspra
because the study reached its main efficacy goal early.
[ID:nN27245149]

In earnings news, both Costco Wholesale Corp (COST.O: ) and
Tiffany & Co (TIF.N: ) reported quarterly profits that beat
expectations. Tiffany also raised its outlook. Costco advanced
4.9 percent to $58.74. Tiffany shot up 7.5 percent to $46.86.
[ID:nN27255167] and [ID:nN27257094]

A late flurry of activity pushed volume up to 9.88 billion
shares traded on the New York Stock Exchange, the American
Stock Exchange and Nasdaq, slightly above last year’s
estimated daily average of 9.65 billion.

Advancing stocks handily outnumbered declining ones on the
New York Stock Exchange by a ratio of about 13 to 1, while on
the Nasdaq, about seven stocks rose for every one that fell.

Stock Market Basics

(Reporting by Chuck Mikolajczak; Additional reporting by
Alexei Oreskovic; Editing by Jan Paschal)

US STOCKS-Wall St flies on China comment, Microsoft upgrade