The S&P 500 extended gains to a fourth day on Thursday, putting it on the cusp of a new five-year high if Friday's jobs report shows encouraging signs for the labor market.
The rally was broad, with all 10 S&P 500 sectors up and financials in the lead. The S&P's financial index gained 1.5 percent.
In the tech arena, Google Inc
The number of Americans filing new claims for unemployment benefits rose only slightly last week after a big drop the week before, the Labor Department reported on Thursday, leading to hopes that Friday's closely watched non-farm payrolls report would show improvement.
"We would expect that the market is going to break significantly in one direction or another on payrolls," said Peter Cecchini, managing director at Cantor Fitzgerald, in New York.
"At the same time, even if the market collapses, event volatility will drain out somewhat. That's not to say volatility overall will fall, but an increase in volatility will be offset by a subtle drop in event volatility."
The CBOE Volatility index, Wall Street's fear gauge, fell 5.7 percent to 14.55.
The Dow Jones industrial average gained 80.75 points, or 0.6 percent, to 13,575.36 at the close. The S&P 500 rose 10.41 points, or 0.72 percent, to 1,461.40. The Nasdaq Composite added 14.23 points, or 0.45 percent, to end at 3,149.46.
The S&P 500 has climbed 16.2 percent so far this year. That strong gain, combined with weak global economic data and questions of whether Spain's bailout will come to pass, have prompted some investors to say the rally is starting to look overextended.
"The bulls have control over this market, clearly. When there is no terrible news, the market goes up," said Uri Landesman, president of Platinum Partners in New York.
"U.S. equities are considered as a flight to quality, which is quite surprising, considering the fact that the economy is not that strong," Landesman said.
The Federal Reserve released minutes from a September policy-making meeting that revealed some reservations about the U.S. central bank's latest stimulus. Market reaction was muted.
Coal companies' stocks rallied following Republican presidential nominee Mitt Romney's support of the coal industry during his televised debate with President Barack Obama on Wednesday night.
"By the way, I like coal," Romney said during the debate.
Shares of Arch Coal
European Central Bank President Mario Draghi, speaking at a regular monthly news conference, said "significant progress" had been made in Spain to bring order to its finances, although more was needed.
The weaker dollar lifted the prices of crude and basic metals, which helped buoy shares in the energy and materials sectors. An S&P index of energy shares rose 1 percent, while an S&P index of materials shares gained 1.3 percent.
Data showed U.S. retailers' September sales looked solid as shoppers wrapped up back-to-school buying and put the brakes on more big spending before the holiday season.
Costco Wholesale
Initial claims for unemployment benefits rose 4,000 to a seasonally adjusted 367,000, the Labor Department said, below economists' expectations for an increase to 370,000.
About 6.1 billion shares changed hands on the New York Stock Exchange, Amex and Nasdaq, compared with the average daily volume of 6.38 billion.
Advancers outnumbered decliners on the NYSE by a ratio of about 11 to 4. On the Nasdaq, more than four stocks rose for every two that fell.
