U.S. stocks closed at multi-year highs on Thursday, with the S&P 500 ending at its highest level since before the collapse of Lehman Brothers as investors hailed a new European bond-buying program aimed at stemming the region's debt crisis.
Sentiment was also boosted by stronger-than-expected data on the U.S. services sector and labor market, which was especially notable ahead of Friday's non-farm August payrolls report.
The rally was broad, with more than three-fourths of stocks listed on both the New York Stock Exchange and Nasdaq ending higher. Materials, financials and industrials - groups tied to the pace of economic growth - led with gains of more than 2 percent, giving the Dow index its biggest daily gain in two months and helping the Nasdaq advance to its highest since 2000.
"As clouds related to Europe start to drift off, there's no question that there's still juice left from here," said Richard Weiss, a Mountain View, California-based senior money manager at American Century Investments, which has about $120 billion in assets under management. "That equities are up double digits year-to-date doesn't deter us from remaining overweight on them for the foreseeable future."
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ECB President Mario Draghi, backing up his July pledge to do whatever it takes to preserve the euro, said the central bank's plan for potentially unlimited bond-buying would address bond market distortions and "unfounded" fears of investors about the survival of the euro.
"We think this is a credible plan to addressing the issue, and while there are still political hurdles, we expect those will be addressed," said Alec Young, global equity strategist at S&P Equity Research in New York.
U.S. companies added staff in August at the fastest clip in five months, according to the better-than-expected ADP report, while a gauge of employment in the service sector also improved more than had been anticipated. New weekly claims for jobless benefits fell to the lowest level in a month.
Even with Thursday's encouraging numbers, economists think the payroll report will show only modest hiring, at 125,000 new jobs, and the unemployment rate holding steady at 8.3 percent.
"ADP doesn't correlate perfectly with payrolls, but people are feeling better about the jobs market these days," Young said. "There was confidence we would see jobs in the mid-100's even before this."
The Dow Jones industrial average rose 244.52 points, or 1.87 percent, to 13,292.00. The Standard & Poor's 500 Index was up 28.68 points, or 2.04 percent, at 1,432.12-- its highest level since May 2008, before the financial crisis began to gather steam. The Nasdaq Composite Index was up 65.12 points, or 2.12 percent, at 3,134.39.
Equities have rallied in recent months on growing expectations for ECB action. The S&P is up about 8 percent since the start of July.
The ECB's program, which Germany's Bundesbank is known to have opposed, would focus on bonds maturing within three years and was strictly within the ECB's mandate. Draghi said only one member of the ECB Governing Council had dissented.
The ECB also announced that it will keep its main interest rate at a record low 0.75 percent, holding fire after a pick-up in inflation last month offset pressure to breathe life into the flagging euro zone economy by easing borrowing costs.
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Volume was stronger than in recent sessions, with about 6.98 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq. However, it remained below last year's daily average of 7.84 billion.
