* Weekly U.S. jobless claims rise more than expected
* July trade deficit falls to lowest level in five months
* ECB hints at prolonging bond-buying program
* Joy Global falls after slashing full-year forecast
* Indexes up: Dow 0.89 pct, S&P 0.97 pct, Nasdaq 0.69 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
Sept 3 (Reuters) - Wall Street extended its gains on Thursday as data pointed to a strengthening U.S. economy and European Central Bank chief Mario Draghi hinted at additional stimulus measures.
The ECB also cut its inflation and growth forecasts for the euro zone in the wake of lower oil prices, weaker growth in China and a strengthening euro.
Draghi’s remarks come a day ahead of the critical monthly U.S. jobs report, which may feed into the Federal Reserve’s decision on the timing of a rate hike.
The data is expected to show that the U.S. economy added 220,000 non-farm jobs in August, up from 215,000 in July, according to a Reuters poll of economists.
The Fed, which meets on Sept. 16-17, has said it will raise rates when it sees sustained economic recovery. But while the labor market has strengthened, inflation remains below the Fed’s 2 percent target.
“I think today’s rally is because Draghi’s comments were a lot more dovish that anticipated,” said Tim Rudderow, chief investment officer at Mount Lucas, an investment management firm which oversees $1.7 billion.
“The payrolls number is critical and if the data is good then a September rate hike will be in play. A rate hike is positive for the market which needs a shot of confidence.”
Data released on Thursday showed new applications for unemployment benefits rose more than expected last week, but the underlying trend remained consistent with a strengthening labor market.
U.S. trade deficit fell in July to its lowest level in five months as exports rose, signaling strength in the economy amid concerns about a global slowdown.
Near-zero rates allowed the U.S. stock market stage a spectacular bull-run since the financial crisis. But the market was rocked by volatility in the past two weeks, triggered by fears of slowing growth in China.
Some investors have said the recent volatility, which left the S&P 500 with its biggest monthly drop in three years in August, may force the Fed to delay a rate hike until the end of the year.
At 11:33 a.m. ET (1533 GMT), the Dow Jones industrial average was up 144.98 points, or 0.89 percent, at 16,496.36, the S&P 500 was up 18.86 points, or 0.97 percent, at 1,967.72 and the Nasdaq Composite was up 32.92 points, or 0.69 percent, at 4,782.90.
All 10 major S&P sectors were higher, with the energy index’s 1.66 percent rise leading the advancers as oil prices rose about 2 percent. Exxon and Chevron rose about 2 percent.
Global markets got some respite on Thursday from the recent turbulence as Chinese markets remain shut on Thursday and Friday due to public holidays.
The CBOE Volatility index, known as Wall Street’s “fear gauge”, fell 8.9 percent to 23.76, slightly above the long-term average of 20. The index had spiked as much as 53.29 early last week.
Joy Global shares were down 16.7 percent at $18.42 after the mining equipment maker reported a fall in quarterly profit and cut its full-year forecast.
Lannett jumped 15.6 percent to $57.19, a day after the company said it would buy Kremers Urban Pharmaceuticals, a U.S. unit of Belgian drugmaker UCB, for $1.23 billion.
Five Below fell 7.8 percent to $35.05 after the teen apparel retailer’s third-quarter forecast disappointed expectations.
Advancing issues outnumbered decliners on the NYSE by 2,335 to 569. On the Nasdaq, 1,810 issues rose and 837 fell.
The S&P 500 index showed no new 52-week highs and one new low, while the Nasdaq recorded 26 new highs and 22 new lows. (Reporting by Tanya Agrawal; Editing by Saumyadeb Chakrabarty)