NEW YORK (Reuters) - The yen slumped on Thursday after the Bank of Japan unveiled a bold plan to pump money into the economy, while U.S. stocks gained on investor optimism that expansionary central bank policies would remain supportive for equities.
The BOJ surprised markets when it unleashed the world's most intense burst of monetary stimulus, planning to nearly double the monetary base to 270 trillion yen ($2.9 trillion) by the end of 2014, in a shock therapy to end two decades of stagnation.
The U.S. dollar and euro soared more than 3.0 percent against the yen in their biggest one-day moves since 2008 after the BoJ took the action to fight deflation.
"The Japanese news was significant to show that there is going to continue to be, on a global basis, easy money, which supports stocks," said Rick Meckler, president of hedge fund LibertyView Capital Management LLC in Jersey City, New Jersey.
The dollar rose as high as 96.41 yen, approaching a 3-1/2-year peak of 96.71 set on March 12. It was last trading at 96.29 yen, up 3.5 percent on the day and on track for its best day since October 2008.
The Dow Jones industrial average closed up 55.76 points, or 0.38 percent, at 14,606.11. The Standard & Poor's 500 Index ended up 6.29 points, or 0.40 percent, at 1,559.98. The Nasdaq Composite Index was up 6.38 points, or 0.20 percent, at 3,224.98.
Advancing volume was more than double declining volume on both the New York Stock Exchange and Nasdaq Stock Market.
However, a U.S. Labour Department report showing the number of Americans filing new claims for unemployment benefits hit a four-month high last week caused some concern about the strength of recovery in employment in March.
Investors are skittish after several weak readings on the economy this week, said Jack DeGan, chief investment officer of Harbor Advisory.
"There is a fear of this being the start of a 'spring swoon'," DeGan said. "I don't think that is the case, but until we get a couple of real inputs that the economy is improving, the rally is likely to stall considering how far we've come this year."
The S&P 500 index, a benchmark for the U.S. stock market, is up 9.4 percent so far this year.
On Wednesday, data on U.S. private-sector hiring disappointed, spurring concerns about Friday's government payrolls report, which is expected to show that 200,000 jobs were added in March.
Peter Cardillo, chief market economist at Rockwell Global Capital in New York, said the rise in jobless claims indicated the sequester was taking a toll on the labour market.
"The economy is slowing, the job market is slowing, and the Fed is not changing its policy," Cardillo said.
Initial claims for state unemployment benefits increased 28,000 to a seasonally adjusted 385,000 last week, the highest level since November, the Labour Department said.
European shares fell sharply as traders, unhappy at the lack of fresh economic stimulus measures from the European Central Bank at the close of its policy meeting on Thursday, took profits on recent sectoral outperformers.
The ECB kept its interest rates on hold and did not unveil any new initiative, such as special credit schemes for small enterprises, which some traders had been hoping for after recent weak economic data.
The pan-European FTSEurofirst 300 index extended losses after ECB President Mario Draghi spoke in the afternoon, to end 1.1 percent lower at 1,180.65.
U.S. Treasury debt prices rose, pushing yields to near 3-1/2-month lows, after the jobless claims data suggested that the government's monthly employment report due out on Friday could show the labour market lost some steam in March, an outcome that would favour safe-haven U.S. debt.
The benchmark 10-year U.S. Treasury note was up 15/32 in price to yield 1.7643 percent.
Crude oil futures dropped as the increase in U.S. claims for unemployment benefits heightened concerns about economic growth in the world's top oil consumer.
Brent futures for May delivery fell 77 cents to settle at $106.34 (69.79 pounds) a barrel.
U.S. crude slumped $1.19 to settle at $93.26 a barrel.
Spot gold prices fell $3.68 to $1,553.60 an ounce.
U.S. Comex gold for June delivery settled down $1.10 at $1,552.40.
(Additional reporting by Richard Hubbard in London; editing by Bernadette Baum and Leslie Adler)