Relief about Europe's pledge to support Greece sent the stock market charging higher Thursday.
The Dow Jones industrial average jumped 106 points as confidence grew that aid to Greece would extinguish one of the several threats that investors see to an economic recovery.
The market's advance was broad-based, but energy and materials stocks logged some of the biggest gains after oil prices rose for a fourth day. A tame report on inflation in China suggested the country wouldn't have to move more aggressively to slow its economy.
China's rapid economic expansion has been driving up demand for natural resources, and the benign signal on inflation there sent shares of materials companies higher. Oil and gas company Pioneer Natural Resources Co. and metals producer Freeport-McMoRan Copper & Gold Inc. each rose more than 4 percent.
A drop in the dollar also helped to lift commodity prices, which are priced in dollars and become less expensive to foreign buyers when the dollar falls.
Encouraging news about jobs in the U.S. also supported the stock market. The Labor Department said first-time claims for jobless benefits fell more than expected last week. Economists say a lasting economic recovery can't take hold without big gains in jobs.
Analysts warned that a patch to Greece's finances won't necessarily be enough to restart a 10-month rally in stocks that stalled last month. Questions are still looming over the market about how the U.S. economy will fare after the government starts to unwind the supports it used to stabilize the financial system over the past two years.
Stephen Wood, chief market strategist at Russell Investments, predicts that financial problems will continue to sideswipe the market.
"Stories similar to Greece are not going to let up for a while," Wood said.
Concerns about China's efforts to slow its rapid economic growth and questions about proposed regulatory changes in Washington for banks are still weighing on the market. The benchmark Standard & Poor's 500 index is down 6.2 percent from a 15-month high in mid-January.
Fed Chairman Ben Bernanke on Wednesday outlined plans to begin to wean the economy from government aid. The market initially took the news poorly but then recovered later in the day as many analysts viewed the plans as a logical next step for policymakers.
"What has really stood out is how negative sentiment has gotten and how quickly it got there. To me, it suggests a pretty skittish market," said Max Bublitz, chief strategist at SCM Advisors in San Francisco.
Still, the brightening prospects for Greece managed to give stocks a bounce. Expectations had been building that a Thursday summit of European leaders would produce a solution for the problem. EU leaders said they would take steps to guard financial stability in Europe but did not offer details.
The Dow rose 105.81, or 1.1 percent, to 10,144.19, its highest close in more than a week. The S&P 500 index rose 10.34, or 1 percent, to 1,078.47. The Nasdaq composite index rose 29.54, or 1.4 percent, to 2,177.41.
Bond prices were mixed following weak demand at a government auction of 30-year Treasury notes. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.73 percent from 3.69 percent late Wednesday.
Crude oil climbed 76 cents to $75.28 per barrel on the New York Mercantile Exchange. Gold also rose.
Fred Fraenkel, chairman of investment policy Beacon Trust Company in Madison, N.J., said the concerns about Greece and countries like Portugal, Spain and Ireland are overblown. He contends that traders were simply nervous that the market had been rising too fast and wanted a pause.
"It's pretty normal that people come up with lots of things to worry about," Fraenkel said. "None of the things are new. They're all pretty much things we've been watching unfold for the last year."
The Labor Department said the number of newly laid-off workers seeking unemployment benefits fell by 43,000 to a seasonally adjusted 440,000, the lowest level in a month. Economists polled by Thomson Reuters had expected a more modest drop.
The decrease came after claims rose in four of the previous five weeks. The recent rise in claims raised questions about whether an economic recovery would be sustainable. High unemployment is one of the biggest obstacles to a rebound.
Economic news from China signaled that inflation eased in January. Consumer prices rose 1.5 percent, less than in December. The report brought speculation that China wouldn't have to slow its economy as a way to fight inflation. Reduced growth would cut into demand for foreign goods and materials.
Among stocks, Pioneer Natural Resources rose $1.96, or 4.3 percent, to $47.33, while Freeport McMoran rose $3.14, or 4.4 percent, to $74.17.
Energy stocks also gained after a buyout in the industry. Utility company FirstEnergy is acquiring rival power provider Allegheny Energy for about $4.7 billion in stock. It will also assume about $3.8 billion in debt.
Allegheny jumped $2.53, or 12 percent, to $23.55, while FirstEnergy fell $1.87, or 4.5 percent, to $39.59.
Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 1.1 billion shares compared with 1 billion Wednesday.
The Russell 2000 index of smaller companies rose 9.64, or 1.6 percent, to 605.46.
Britain's FTSE 100 rose 0.6 percent, Germany's DAX index fell 0.6 percent, and France's CAC-40 lost 0.5 percent. Japanese markets were closed for a holiday.