* McDonald’s up as China demand recovers
* Dow Chemicals rises, boosting materials sector
* Caterpillar, 3M reverse course and rise
* Hospital operators tank
* Indexes up: Dow 1.54 pct, S&P 1.46 pct, Nasdaq 1.5 pct (Updates to early afternoon)
By Abhiram Nandakumar
Oct 22 (Reuters) - The S&P 500 and the Dow rallied to nine-week highs and were poised for their best month since October 2011, on strong corporate results and cues from the European Central Bank about extending its stimulus program.
The biggest lift to the Dow came from McDonald‘s, whose shares jumped 7.3 percent to $110.05, after its quarterly results beat estimates as demand recovered in China.
Dow Chemicals rose 4.9 percent to $49.81 after its results.
European Central Bank President Mario Draghi said the bank could extend its stimulus program beyond 2016 to boost euro-zone growth and bring inflation closer to 2 percent.
“That’s all that central banks have to do anymore. Just hint that they’re going to throw easy money in there and it scares the shorts and enables the Bulls and bang! we’ve got these nice pops,” said Jeff Clark, trading analyst at Stansberry Research.
At 12:17 p.m. ET (1617 GMT), the Dow Jones industrial average was up 264.44 points, or 1.54 percent, at 17,433.05, the S&P 500 was up 29.49 points, or 1.46 percent, at 2,048.43 and the Nasdaq composite index was up 72.39 points, or 1.5 percent, at 4,912.51.
Data on Thursday showed U.S. unemployment benefits claims rose by 3,000 to 259,000 last week, but below the 265,000 expected, while existing home sales increased more than expected to an annual rate of 5.55 million units in September.
The U.S. Federal Reserve, which kept interest rates unchanged at near-zero levels in September, has said it will wait for signs of global economic resilience before pulling the trigger.
Microsoft’s 3 percent rise ahead of its results later on Thursday provided the biggest boost to the S&P 500 and the Nasdaq. Alphabet, AT&T and Amazon also report after the close.
EBay rose 12.9 percent to $27.29 and Texas Instruments was up 10.3 percent at $57.22 after better-than-expected results late on Wednesday.
The optimism even spread to companies with poor results on Thursday. Caterpillar reversed course to trade up 5.6 percent at $72.78, while 3M rose 4.2 percent to $156.17.
Nine of the 10 major S&P sectors were higher, with the industrials sector’s 2.9 percent rise leading the advancers.
Only healthcare appeared immune to the upbeat mood, declining about 1.2 percent.
Valeant Pharmaceuticals continued its slide for the fourth day, falling 18.4 percent to $96.80.
Community Health Systems sank 34.5 percent to $26.54 after its forecast disappointed, dragging down hospital operators Lifepoint, HCA Holdings and Tenet Healthcare.
American Express fell 5.8 percent to $72.09 after its quarterly profit missed estimates.
Advancing issues outnumbered decliners on the NYSE by 2,448 to 573. On the Nasdaq, 1,855 issues rose and 810 fell.
The S&P 500 index showed 31 new 52-week highs and six new lows, while the Nasdaq recorded 61 new highs and 49 new lows. (Reporting by Abhiram Nandakumar in Bengaluru; Editing by Don Sebastian)