Financial and materials shares led stocks on a broad march higher and boosted the blue chips, which posted their biggest gains in weeks.
The Dow Jones Industrial Average rose 80.75 points, or 0.6%, to 13575.36, the largest single-day gain since Sept. 13, when the Federal Reserve sparked a 1.5% rally in the Dow industrials by announcing a new bond-buying program.
The Standard & Poor's 500-stock index increased 10.41 points, or 0.72%, to 1461.40, marking the index's fourth consecutive day of gains. The Nasdaq Composite gained 14.23 points, or 0.45%, to 3149.46.
Stocks saw strong gains in the first 30 minutes of trading, as weekly jobless claims and factory-order data came in slightly better than expected—though both reflected some slowing in the U.S. economy—and a Spanish bond auction saw a strong response.
"What we're seeing here is an upward-biased market," said Tim Hoyle, director of research for Haverford Trust Co., a Radnor, Pa.-based firm with $6.5 billion under management. "As long as we don't get any news that really changes that theme, that's the direction we're going to keep going. No one wants to fight the Fed."
After the morning's gains, investors mostly sat on their hands ahead of Friday's monthly employment report. Stocks traded within a relatively narrow range through the remainder of the day.
"I imagine people aren't looking to tomorrow's number to say the U.S. economy is booming, but if you have a decent number, that could be of crucial importance," said Dan Greenhaus, chief global strategist with BTIG LLC.
Initial claims for jobless benefits edged up to 367,000 during the latest week, slightly better than expected. August factory orders also came in just better than expected, falling 5.2% from July.
Stocks held their gains after the release of the minutes to the Federal Reserve's last policy-setting committee.
Since Thursday's economic reports were only slightly better than expected, and reflected some worsening of the U.S. economy, some traders said Wednesday evening's debate between President Obama and his Republican challenger, Mitt Romney, could have played a part in the rise.
"It would appear that Romney did a great job, and that could translate into a better tone in the stock market," said Ted Weisberg, trader for Seaport Securities. "I think that the stock market would very much react favorably to a potential Romney victory."
European markets closed mostly flat after European Central Bank President Mario Draghi spoke to the press. An auction of Spanish government bonds went off without a hitch, with borrowing costs declining for most maturities. Still, Spain's IBEX-35 fell 0.2%.
Asian markets closed mostly higher, with Japanese markets benefiting from a slight decline in the yen. Japan's Nikkei Stock Average rallied 0.9% and Australia's S&P/ASX 200 tacked on 0.3%. China's market remained closed for a holiday.
Front-month crude-oil futures for November settled 4% higher, at $91.71 a barrel, bouncing from a two-month low hit on Wednesday, while front-month gold futures for October advanced 0.9% to $1,794.10 a troy ounce. The dollar fell against the euro and the yen. Yields on the 10-year Treasury bond rose to 1.671%.
In other corporate news, plastic-packaging manufacturer Berry Plastics Group Inc.BERY -5.00% fell in its public-trading debut, marking a poor start for the week's biggest initial public offering, which raised at least $470 million. San Diego-based biopharmaceutical company Regulus Therapeutics Inc. RGLS +5.00% also began trading in an initial public offering, posting gains. Before listing, it increased the size of its offering and reduced the price of its shares.
Spinal device maker NuVasive Inc. NUVA -32.85% saw shares slide after it warned investors its third-quarter revenue would be lower than expected. The shares were downgraded by at least four Wall Street analysts following the announcement.
Software maker Informatica Corp. INFA -22.58% shares slipped after it announced it would likely post third-quarter results below Wall Street expectations.
Applied Materials AMAT -0.54% dipped after the semiconductor equipment maker announced a restructuring that would lead to cuts within its global work force.
Avery Dennison AVY -4.39% and 3M agreed to terminate their agreement under which 3M would have acquired Avery Dennison's office and consumer products business. Avery Dennison shares fell and 3M shares rose.
