* Second-qtr GDP rose 3.7 pct vs earlier reading of 2.3 pct
* Weekly jobless claims fall more than expected
* World bourses gain after brutal week
* All 10 S&P sectors higher; led by energy
* Indexes up: Dow 1.57 pct, S&P 1.77 pct, Nasdaq 1.86 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
Aug 27 (Reuters) - U.S. stocks extended their rally on Thursday, raising hopes that the worst was behind the market, after further evidence that the U.S. economy was on a solid footing.
Data showed annual U.S. gross domestic product grew 3.7 percent in the second quarter - much faster than the previous estimate of 2.3 percent. Other data showed jobless claims fell more than expected last week, pointing to a steadily firming labor market.
“Today’s GDP data shows that the U.S. economy’s fundamentals are strong and are growing despite all the global headwinds,” said Brad McMillan, chief investment officer for Commonwealth Financial in Waltham, Massachusetts.
The market surged on Wednesday after New York Fed President William Dudley said the case for a September rate hike seemed “less compelling” after recent market volatility due fears of slowing growth in China.
The U.S. Federal Reserve, which meets on Sept. 16-17, has said it will raise rates only when it sees a sustained recovery in the economy.
The Fed has kept interest rates at near zero, which has helped fuel the stock market to historic levels since the financial crisis. An interest rate hike makes debt more expensive, affecting companies’ profit margins.
Kansas City Federal Reserve President Esther George, who has been arguing for a near-term U.S. rate hike, said on Thursday the Fed should now take a “wait and see” approach to hiking rates due to market volatility and China’s economic slowdown.
Investors will be keeping a sharp eye on an annual conference starting on Thursday of some of the world’s top central bankers in Jackson Hole, Wyoming for further clues on the timing of a U.S. interest rate hike.
The market also got a rare dose of good news from China, where stocks snapped a brutal five-day losing streak.
However, investors remained cautious with the three main indexes still down for the month.
“I think in terms of sharp drops, the worst is probably behind us but it’s going to take a while before we get back to normal and we might still see some downward risk,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
At 10:50 a.m. ET (1450 GMT) the Dow Jones industrial average was up 255.38 points, or 1.57 percent, at 16,540.89, the S&P 500 was up 34.32 points, or 1.77 percent, at 1,974.83 and the Nasdaq Composite was up 87.19 points, or 1.86 percent, at 4,784.73.
All 10 major S&P sectors were higher, with the energy index’s 3.85 percent rise leading the advancers as oil prices jumped more than 4 percent. Chevron’s 4.5 percent rise gave the biggest boost to the Dow.
Shares of Apple, which helped lead the market higher on Wednesday, were up 1.7 percent at $111.53. The stock provided the biggest boost to the S&P and the Nasdaq.
St Jude Medical rose as much as 15 percent in premarket trade after the Financial Times reported that Abbott Laboratories was preparing a $25 billion bid for the company.
But the stock pared much of those gains after an Abbott spokesman told Reuters it was not pursuing an offer. St Jude was up 4.9 percent at $72.74.
Tesla was up 7 percent at $240.42 after its Model S P85D received the highest possible score in test by influential magazine Consumer Reports.
Advancing issues outnumbered decliners on the NYSE by 2,480 to 480. On the Nasdaq, 1,994 issues rose and 662 fell.
The S&P 500 index showed no new 52-week highs and one new lows, while the Nasdaq recorded eight new highs and 26 new lows. (Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)