US stocks surge after a surprise interest rate cut in China and a hint of stimulus in Europe

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The Wall Street subway stop on Broadway, in New York's Financial District, Thursday, Oct. 2, 2014. U.S. financial markets surged in early trading Friday, Nov. 21, 2014 as investors cheered a surprise interest rate cut in China and a hint of further stimulus for Europe from the head of the region's central bank. The rally extended gains from a day before, pushing the major market indexes further into record territory. (AP Photo/Richard Drew)

U.S. stocks rose in midday trading Friday, on pace to extend their record highs from a day earlier. News of an interest rate cut in China and the possibility that Europe's central bank will do more to stimulate economic growth drove the rally. Investors also pored over a mixed bag of corporate earnings.

KEEPING SCORE: The Standard & Poor's 500 index gained 12 points, or 0.6 percent, to 2,064 as of 12:03 p.m. Eastern time. The Dow Jones industrial average rose 113 points, or 0.6 percent, to 17,832. The Nasdaq composite added 22 points, or 0.5 percent, to 4,723. The Dow and S&P 500 are at record highs.

SECTOR VIEW: Eight of the 10 sectors in the S&P 500 index rose, with materials stocks climbing the most. Design software company Autodesk led the gainers, adding $4.33, or 7.4 percent, to $62.77. Utilities and telecommunication stocks declined.

EARNINGS SURPRISES: Investors bid up shares in several companies that reported better-than-expected earnings. Software maker Splunk rose $3.72, or 5.7 percent, to $68.66. Sporting goods retailer Hibbett Sports gained $3.70, or 8.1 percent, to $49.63.

EARNINGS MISSES: Shares in Aruba Networks fell 11.6 percent after the wireless communications company's outlook fell short of financial analysts' expectations. The stock shed $2.52 to $19.28. Retailers The Gap and GameStop also reported quarterly financial results that fell short of forecasts. GameStop tumbled $5.52, or 12.7 percent, to $38.02. The Gap shed $2.20, or 5.5 percent, to $37.94.

GOING, GOING, GONE: Sotheby's added 8.3 percent a day after CEO William Ruprecht announced he will step down and that the New York auction house's board has started a search for its next chief executive. Shares rose $3.26 to $42.49.

BOARDROOM DEAL: Dow Chemical agreed to add four new members to its board of directors after pressure from hedge fund activist Daniel Loeb's Third Point. The stock rose $1.46, or 2.8 percent, to $52.94.

CHINA RATE CUT: China's central bank cut the interest rate on its one-year loans to financial institutions by 0.4 percentage point to 5.6 percent. The surprise reduction comes in the wake of recent figures showing that the country's annual growth rate slowed to a five-year low of 7.3 percent last quarter. Many analysts think a key motivation behind the rate cut is the recent steep decline in the value of the Japanese yen, which is likely to impact on China's exports.

DRAGHI ALSO MOVES MARKETS: European Central Bank President Mario Draghi also caused a stir in markets when he told a conference in Frankfurt, Germany, that the bank is willing to "step up the pressure" and increase its efforts to stimulate Europe's struggling economy. His comments sent the euro lower and stocks higher. If current efforts do not achieve the desired effect, Draghi said the ECB could "broaden even more the channels through which we intervene." For many in the markets, that's a clear hint that the bank could soon starting buying government bonds.

OVERSEAS MARKETS: In Europe, Germany's DAX jumped 2.6 percent, while the CAC-40 in France rose 2.7 percent. The FTSE 100 index of leading British shares rose 1.1 percent. In Asia, Japan's Nikkei index rose 0.3 percent, while Hong Kong's Hang Seng rose 0.4 percent. Seoul's Kospi added 0.3 percent.

ENERGY: The price of crude oil fell. Benchmark U.S. crude slipped 7 cents to $75.78 a barrel in New York.

BONDS: U.S. government bond prices rose. The yield on the 10-year Treasury note fell to 2.33 percent from 2.34 percent late Thursday.

AP Business Writer Pan Pylas in London contributed to this report.

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