US Stock rally: Three for three (ext)

NEW YORK (CNNMoney) -- U.S. stocks rallied for a third straight day Thursday, as investors turned optimistic, following the European Central Bank's latest policy measures aimed at boosting liquidity in the European banking system.

The Dow Jones industrial average (INDU) jumped 183 points, or 1.7%, the S&P 500 (SPX) added 21 points, or 1.8%, and the tech-heavy Nasdaq composite (COMP) rose 46 points, or 1.9%.

U.S. banks have been hammered recently, amid worries about what exposure they may have to sovereign debt of Greece and other so-called peripheral nations in Europe.

But Treasury Secretary Tim Geithner reassured investors that U.S. banks are "strong" and can withstand Europe's crisis.

"The direct exposure of the US financial system to the countries under the most pressure in Europe is very modest," he said, during a Congressional hearing. "Europe as whole though, is a big deal."

U.S. banks have been hammered recently, amid worries about what exposure they may have to sovereign debt of Greece and other so-called peripheral nations in Europe.

Early Thursday, the ECB announced a series of "non-standard" policy measures aimed at raising liquidity in European banks, easing concerns that an escalating debt crisis could trigger the collapse of European banks.

"We're seeing some optimism because it looks like officials are starting to work more rapidly to provide stability to the financial markets," said Michael Sheldon, chief market strategist at RDM Financial Group.

Despite the moves to aid European banks, the ongoing nervousness about scant progress over Europe's debt crisis remain.

"I don't think Europe's problems are about liquidity," said Kim Caughey Forrest, senior equity analyst at Fort Pitt Capital Group. "The steps may help prevent a run on the banks, which is good, but they don't help fix the sovereign debt issue."

As long as a real solution to Europe's debt crisis remains in the distant future, trading will remain choppy.

"The biggest overhang on the market is Europe's debt issue, and nervousness in the market will loom until we have some answers," said Timothy Ghriskey, chief investment officer at Solar Asset Management. "For now, there seems to be a lot of indecision and lack of visibility."

The dollar fell against the euro and the Japanese yen, but gained slightly versus the British pound.

Oil for November delivery rose $2.91 to settle at $82.59 a barrel.

Gold futures for December delivery rose $11.60 to settle at $1,653.20 an ounce.