Stocks surged 2 percent on Thursday after China denied a report it was reviewing its holdings in euro-zone sovereign bonds due to the region's debt crisis.

The People's Bank of China said a Financial Times report that Beijing was concerned about its euro-zone exposure was groundless. The report cut short a rally in the last session.

The market is bouncing off oversold, but I think the big catalyst this morning is comments coming out of China that tempered concerns about the Chinese government possibly trimming back its $600 billion plus of euro zone bond holdings, said Fred Dickson, chief market strategist at D.A. Davidson & Co in Lake Oswego.

The Dow Jones industrial average <.DJI> rose 159.76 points, or 1.60 percent, at 10,134.21. The Standard & Poor's 500 Index <.SPX> climbed 19.80 points, or 1.85 percent, at 1,087.75. The Nasdaq Composite Index <.IXIC> added 49.94 points, or 2.27 percent, at 2,245.82.

The Dow jumped back above 10,000 and the CBOE volatility index <.VIX> fell 12 percent to levels seen in the middle of May before investors got rattled over the fragility of the European banking system.

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 last month.

Financial and natural resource shares, among the casualties in a recent sell-off, rose sharply. Citigroup Inc was up 3.6 percent to $4, while United States Steel Corp added 4.5 percent to $47.09.

Dow component Pfizer Inc rose 1.4 percent to $15.32 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.

(Reporting by Edward Krudy; editing by Jeffrey Benkoe)

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