Wall St. sign is seen in New York's financial district
The Dow is also on pace to record its largest percentage increase in January since 1997. Meanwhile, the S&P 500 is likewise set to notch its biggest point and percentage gains since 1997. REUTERS

Goldman Sachs recovered quickly Thursday from unconfirmed reports that the company's corporate debt was being downgraded by Standard and Poor's, extending the stock's day-long rally that had begun before downgrade rumors.

At 2:57 p.m., after news of the ostensible downgrade flashed across Bloomberg News terminals worldwide, a sudden selloff caused shares of Goldman Sachs (NYSE:GS) to drop from $94.08 to $92.88, a decline of 1.28 percent in mere seconds.

Twenty-nine minutes later, as a spokesperson for the credit rating agency denied the reports, a strong rally pushed the stock right back up.

Jumping higher than the levels it had been trading at when news of the ratings action broke, Goldman Sachs ended the day at $94.42, up $2.47, or 2.63 percent from the previous session's close. The stock was up further in after-hours trading.

Shares of Goldman were part of a wider rally in financials following positive economic data out of the U.S. and news that European banks had been provided massive loans by their central banking authority.

The KBW Bank Index, a benchmark index of U.S. banks, was up 2.82 percent for the day. Leading the charge were Morgan Stanley (NYSE:MS) and Citigroup (NYSE:C), up 6.51 and 5.94 percent for the day, respectively.

The S&P 500 Index, a benchmark measure of U.S. equities closed at 1254 Thursday, up .83 for the day.

S&P Morgan Stanley Nyse Citigroup