US STOCKS-Wall St rallies 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 2.3 pct, S&P up 2.8 pct, Nasdaq up 3.3 pct
                                
 * For up-to-the-minute market news see [STXNEWS/US]
 (Updates to late afternoon, changes byline)
                                
 By Chuck Mikolajczak
                                
 NEW YORK, May 27 (Reuters) - U.S. stocks rose sharply on
Thursday as investor worry was eased after China refuted a
report that it was reviewing its holdings in euro-zone
sovereign bonds due to the region's debt.
                                
 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]
                                
 "It just means China is going to continue to be a sensible
investor -- because of events in Europe, they are not going to
change their basic investment strategy," said Hugh Johnson,
chief investment officer of Johnson Illington Advisors in
Albany, New York.
                                
 "With every passing day, more and more investors are
reaching the conclusion that although events in southern
Europe will affect the European and U.S. economy, they will
not derail the current recovery."
                                
 Microsoft Corp <MSFT.O> climbed 3.8 percent to $25.98, a
day after ceding its position to Apple <AAPL.O> as the largest
technology company by market cap, as FBR Capital Markets
upgraded the Dow component to "outperform," citing improving
fundamentals and recent share underperformance.
[ID:nSGE64Q0CS]
                                
 The Dow Jones industrial average <.DJI> gained 231.03
points, or 2.32 percent, to 10,205.48. The Standard & Poor's
500 Index <.SPX> climbed 29.71 points, or 2.78 percent, to
1,097.66. The Nasdaq Composite Index <.IXIC> jumped 71.53
points, or 3.26 percent, to 2,267.41.
                                
 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
4.7 percent.
                                
 By late afternoon, the S&P 500 was trading 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.
                                
 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 percent to $15.26
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
4.7 percent to $58.63. Tiffany shot up 5.4 percent to $45.96.
[ID:nN27255167] and [ID:nN27257094]
 (Reporting by Chuck Mikolajczak; Editing by Jan Paschal)