Banking stocks helped the overall markets snap a three-day slide on Thursday after the release of positive employment and manufacturing data.

The KBW Bank Index rose 2.96% after closing down three days in a row.

Industry watchers credited the rally to signposts that the economy might be on the mend. Government data showed that continuing claims for state unemployment benefits fell this month for the first time since January. A Federal Reserve survey also showed that manufacturing in the Middle Atlantic region contracted less severely than expected in June.

"Looks like we're going to break this three-day losing streak today, and we can say thanks to some economic numbers that came out today," Peter Cardillo, the chief market economist at Avalon Partners, said Thursday. "The market is being led higher by the financials — banking, insurance and pharmaceuticals."

Major banking companies closed higher.

JPMorgan Chase & Co. rose 4.4%, Wells Fargo & Co. 2.64%, Bank of America Corp. 4.88%, PNC Financial Services Group Inc. 1.46% and Citigroup Inc. 5 cents a share, to $3.13.

Most regional banks also fared well. U.S. Bancorp rose 1.46%, SunTrust Banks Inc. 1.31%, KeyCorp 7.51%, Fifth Third Bancorp 6.31% and Huntington Bancshares Inc. 23 cents, to $4.33 a share.

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