An increase in regional manufacturing pushed the stock market to its third straight advance and offset concerns about lower sales at Wal-Mart.
The Dow Jones industrial average rose 84 points, bringing its gains for the week to nearly 300 points. It's the best streak for the Dow since November.
Stock futures turned lower after the closing bell Thursday when the Federal Reserve announced it was hiking the interest rate that it charges banks for emergency loans. The move doesn't change consumer borrowing rates, but the notion that policymakers would start to reel in some of the emergency economic supports put in place since 2007 spooked investors.
The Fed's decision to increase the interest rate on emergency loans by one-quarter point to 0.75 percent pushed the dollar higher. Higher interest rates tend to raise the value of the dollar against other currencies. That can be bad for stocks by weakening demand for commodities like oil and metals, which is a negative for industrial companies.
Dow Jones industrial average futures fell 0.6 percent. Standard & Poor's 500 index futures lost 0.8 percent, while Nasdaq 100 index futures fell 0.7 percent.
The gain in stocks Thursday came after the Philadelphia Federal Reserve said its index of regional manufacturing rose to 17.6 in February from 15.2 in January. That follows reports the past two days that also pointed to a pickup in business at the nation's factories.
The report lifted stocks of companies that process raw materials because increased manufacturing should boost sales. Newmont Mining Corp. and glass maker Owens-Illinois Inc. each rose more than 2 percent.
The market drifted higher in light trading volume, so analysts cautioned against reading too much in to the latest gain. Light volume indicates that many investors with concerns about the market are staying on the sidelines.
The market's gains were modest in the early hours of trading after Wal-Mart Stores Inc.'s reported a drop in quarterly sales at its flagship U.S. stores and issued a disappointing forecast.
At the same time, the Labor Department reported that the number of workers seeking unemployment benefits for the first time rose 31,000 to 473,000 last week. Economists polled by Thomson Reuters forecast claims would fall. Unemployment is a major obstacle to a sustained recovery.
Eric Mintz, assistant portfolio manager of the Eagle Mid Cap Growth Fund in St. Petersburg, Fla., said traders were able to look past the latest jobs report because heavy snow in parts of the country has skewed some of the numbers to make unemployment look worse. He said the bulk of economic reports still signal the economy is improving.
"We're in the early phases of the recovery and you are going to get spotty data," he said.
The Dow rose 83.66, or 0.8 percent, to 10,392.90, putting its gain for the week at 294 points. The three-day gain of 2.9 percent is the strongest for the Dow since the period ended Nov. 9. The Dow is now down 3.1 percent from a 15-month high of 10,725.43 that came Jan. 19.
The broader Standard & Poor's 500 index rose 7.24, or 0.7 percent, to 1,106.75. The Nasdaq composite index rose 15.42, or 0.7 percent, to 2,241.71, its fifth straight advance.
Investors have been buying stocks this week on growing evidence of improvement in the U.S. economy. They have stopped worrying, at least for now, about potential overseas troubles derailing a global recovery. Investors have been concerned that debt problems in Greece and other European countries could spread. China's move to tighten lending standards and slow its growth to avoid speculative bubbles has also worried investors.
Bond prices fell, pushing yields higher. The yield on the benchmark 10-year Treasury note rose to 3.80 percent from 3.74 percent compared late Wednesday.
The dollar mostly rose against other major currencies.
Gold rose, while crude oil rose $1.73 to $79.05 per barrel on the New York Mercantile Exchange.
George Feiger, CEO of Contango Capital Advisors, the wealth management arm of Zions Bancorporation in San Francisco, contends that the advance in stocks is overdone considering big hurdles for the economy, including high levels of consumer debt and unemployment.
"The market seems to have anticipated not only the recovery from this recession but a bit of the recovery from the next one," Feiger said.
The latest advance in stocks came as earnings reports were mixed. Wal-Mart reported a fourth-quarter profit that topped analysts' expectations. But sales at stores open at least a year fell. The company predicted sales at stores open a year will be down as much as 1 percent or up as much as 1 percent for its U.S. namesake stores this year. The stock fell 59 cents, or 1.1 percent, to $53.47.
Hewlett-Packard Co. reported a better-than-expected fiscal first quarter after the market closed Wednesday. The computer and technology company, which like Wal-Mart is a component of the Dow, also forecast full-year revenue and profit that exceeds analysts' expectations. Its shares rose 69 cents, or 1.4 percent, to $50.81.
Newmont Mining rose $1.17, or 2.5 percent, to $48.41, while Owens-Illinois rose 66 cents, or 2.4 percent, to $27.81.
More than two stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 3.96 billion shares, down from 4.25 billion Wednesday.
The Russell 2000 index of smaller companies rose 4.49, or 0.7 percent, to 629.32.