A sharp rebound in Chinese shares helped erase yesterday’s slump and sent Asian stocks sharply higher Thursday, a day after Shanghai’s big fall ignited fears of a Chinese stock collapse and triggered a selling spree around the world.  Asian markets also drew comfort from an overnight recovery on Wall Street after a surprise drop in U.S. crude stockpiles lifted hopes for an economic recovery and sent investors back on the buying table.

Shanghai’s main index jumped 126 points, or 4.5%, to 2,911.58, while Japan’s Nikkei 225 stock average climbed 179.41 points, or 1.8%, to 10,383.41.  Hong Kong’s Hang Seng rose 374.63, or 2%, to 20,336.36.  South Korea’s Kospi advanced 2% to 1,576.39.

Stock futures pointed to a higher open on Wall Street Thursday.  Dow Jones industrial average futures rose 24, or 0.3%, to 9,300. Standard & Poor’s 500 index futures edged up 3.70, or 0.4%, to 1,000.80, while Nasdaq 100 index futures rose 3.50, or 0.2%, to 1,602.25.

On Wednesday, the unexpected drop in crude inventories helped U.S. stocks wipe off early losses and finish the day with gains of less than 1% as investors looking for reassuring sings picked up oil and other commodity stocks.  Rumors that the Obama Administration was considering a second stimulus package also helped sentiments on the Street yesterday.  However, the rumors were later dismissed, with White House spokesman Gibbs noting, “There is no imminent economic announcement.”

The 30-stock Dow Jones industrial average added 61 points, or 0.7%, to close at 9,279.16.  The NASDAQ added 13.32 points, or 0.7% for a close at 1,969.24, and the S&P500 ended 6 points higher at 996, up 0.7%.  Volume remained light with only 988 million shares trading on the NYSE and advancing shares ahead of decliners by a 3-to-2 margin.

On the earnings front, the picture was mixed as Hewlett-Packard (NYSE:HPQ), Deere (NYSE:DE) and PetSmart (NASDAQ:PETM) reported earnings that beat expectations, but outlook from these companies disappointed.  Some retailers, though, were optimistic, with BJ’s Wholesale (NYSE:BJ) and Limited (NYSE:LTD) offering improved yearly outlook.

Among S&P500 industry sectors, oil and gas shares advanced 1.9% and were the leading gainers.  DJIA components Chevron (NYSE:CVX) and ExxonMobil (NYSE:XOM) moved higher, up 1.8% and 2.3%, respectively.  Commodity-related issues were not far behind, with basic material shares up 0.9%, following the broad-based gain in commodities. Freeport-McMoRan (NYSE:FCX) shares surged 2.7%.  However, Alcoa (NYSE:AA) led the decliners on the DJIA after Goldman Sachs (NYSE:GS) downgraded the stock, citing Alcoa’s (NYSE:AA) recent appreciation and advised rolling positions into Freeport-McMoRan (NYSE:FCX), which is on its Conviction Buy List.

Health care issues advanced 1.3%, as Merck’s (NYSE:MRK) 2.5% advance led DJIA component gains. A New Jersey court upheld the firm’s patent for asthma drug Singulair, and ruled against Teva Pharmaceuticals (NASDAQ:TEVA).

Despite the day’s reported increase in weekly mortgage applications, financial shares failed to gain in the market advance, and eased 0.03%. News of last week’s rise in mortgage applications on increased refinancing requests did not have an impact on financial shares.  Bank of America (NYSE:BAC) shares dropped 0.9% and JP Morgan (NYSE:JPM) eased 0.7%.

Retailers scheduled to report include: Barnes and Noble (NYSE:BKS), GameStop (NYSE:GME), HJ Heinz (NYSE:HNZ), Hormel Foods (NYSE:HRL), Ross Stores (NASDAQ:ROST), Sears Holdings (NASDAQ:SHLD), and Gap (NYSE:GPS).

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