* Chevron warns on Q3 earnings
* Initial jobless claims rise on technical problems
* Citrix Systems tumbles after outlook
* Indexes up: Dow 1.21 pct, S&P 1.25 pct, Nasdaq 1.50 pct
By Chuck Mikolajczak
NEW YORK, Oct 10 (Reuters) - U.S. stocks rallied strongly atthe open on Thursday, with each of the major indexes climbingmore than 1 percent, as investors were encouraged by signs ofprogress in fiscal negotiations in Washington.
According to a Republican leadership aide, U.S. HouseRepublicans are considering agreeing to a short-term increase inthe government's borrowing authority, keeping a possible defaultafter Oct. 17 at bay and buying time for negotiations on broaderpolicy measures.
President Barack Obama and congressional leaders are set tomeet Thursday for further discussions.
"It would be a minor sign of hope there may be some morepositive news coming in the next couple of days, hard to makemuch more out of that," said Fred Dickson, chief marketstrategist, D.A. Davidson & Co. Lake Oswego, Oregon.
"The markets right now are betting somebody will blinkbetween now and October 17."
The U.S. government shutdown has been in effect for ten dayssince congressional Republicans refused to pass a budget for thefiscal year without modifications to Obama's healthcare reformlaw.
U.S. Treasury Secretary Jack Lew said the gridlock inWashington was hurting the U.S. economy, and urged Congress toraise a cap on government borrowing to keep America fromdefaulting on its debt.
Initial claims for state unemployment benefits increased66,000 to a seasonally adjusted 374,000, the highest since theend of March and well above expectations for 310,000 claims,though technical problems in California from computer upgradeswere responsible for half the increase in claims.
The Dow Jones industrial average rose 179.56 points,or 1.21 percent, to 14,982.54, the S&P 500 gained 20.74points, or 1.25 percent, to 1,677.14 and the Nasdaq Composite added 55.29 points, or 1.5 percent, to 3,733.066.
This year's high-flying tech stocks - such as Facebook Inc, up 3.2 percent at $48.28, and Amazon.com Inc,up 2.3 percent at $305 - rebounded after several days ofdeclines.
The Nasdaq technology sector was up 1.1 percentafter having shed 2.8 percent over the last three sessions, itsbiggest three-day drop since late June.
Chevron Corp, fell 0.6 percent to $115.45 as thebiggest drag to the Dow after the second-largest U.S. oilcompany warned Wednesday its third-quarter earnings would belower than in the second quarter as fuel margins were squeezed.
Gilead Sciences Inc gained 4.4 percent to $61.47 asthe biggest boost to the S&P 500 after a pivotal trial of itsdrug idelalisib was determined by independent monitors to beeffective against Leukemia and was stopped early. The NYSEArcabiotech index climbed 2.4 percent.
Citrix Systems Inc slumped 11 percent to $59.32,making it the worst performer on the benchmark S&P index afterthe cloud computing software maker estimated quarterly resultsto be below analysts' expectations as businesses delayedcontracts.
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