Optimism about Europe drove stocks sharply higher Thursday.
Lower Italian bond yields eased some euro-zone concerns and rumors about China's strong GDP growth bolstered investors' appetite for risk.
The Dow Jones industrial average closed the day up 181 points.
The S&P 500 popped above its 50-day moving average in a sign that traders may see the recent pullback of nearly 5 percent as an opportunity to catch up with the benchmark's performance. The index is up more than 10 percent for the year to date.
In a sign that the U.S. labor market's recovery may be stalling, government data showed new U.S. claims for unemployment benefits rose unexpectedly last week to their highest level since January. But some economists cited the Easter holidays for the spike in claims, adding that they expected applications will keep declining in the weeks ahead.
Benchmark bond yields in Italy and Spain dropped following solid demand at this week's Italian debt auctions, while the euro hit a one-week high against the U.S. dollar, indicating a reduction in near-term concern about the euro zone's debt troubles.
"The easing bond yields are a signal to investors here that things aren't quite that bad in Europe," said Brian Gendreau, market strategist with Cetera Financial Group.
Early into earnings season, results are beating Wall Street's expectations at a fast clip. Analysts say the expectations could have been lowered too much and stocks can seem cheap after the S&P's recent pullback of almost 5 percent.
"What early reports we have already show a pretty good beat rate," said Jim Paulsen, chief investment officer of Wells Capital Management in Minneapolis. "I wonder if we're going to beat the low hurdle of earnings."
Market participants also cited expectations that China's gross domestic product data, due tonight, would surprise on the upside as a reason for gains in basic materials shares. But some were skeptical of this rumor.
The U.S. Federal Reserve is running through data to determine if last month's soft non-farm payrolls report was a weather-related setback or a sign the recovery is losing momentum, said William Dudley, president of the Federal Reserve Bank of New York.
Dudley left the door open to additional stimulus measures if the economic recovery gets off track. Previous rounds of quantitative easing have provided a boost for equities and other risk assets.
Reuters contributed to this report.