NEW YORK — Wall Street extended its advance Thursday after a better-than-expected reading on the nation's economy and a drop in jobless claims gave investors some reassurance that the economy is holding up. The major indexes rose about 1 percent, including the Dow Jones industrial average, which gained nearly 200 points.

A decline in oil prices also appeared to add force to the rally in stocks. But volume was again light heading toward the Labor Day weekend, helping to exaggerate price moves.

The Commerce Department's report that gross domestic product rose at an annual rate of 3.3 percent for the April-June period helped punctuate a week of generally upbeat economic readings that have left guarded investors somewhat optimistic. The weaker dollar that helped boost U.S. exports pushed GDP growth beyond the government's initial estimate of a 1.9 percent as well as economists' forecast of 2.7 percent.

The increase came as the government handed out rebate checks to taxpayers. It marked the economy's best performance since the third quarter of last year, when GDP rose at a 4.8 percent pace.

Investors are watching GDP, the best barometer of the economy's well-being, to look for signs that growth is picking up after being pounded by housing woes and a debilitating credit crisis. The economy grew at a weak rate of 0.9 percent in the first quarter and actually shrank in the last three months of 2007.

Also Thursday, the Labor Department said the number of newly laid off people seeking jobless benefits fell for the third straight week. The number of claims dropped to a seasonally adjusted 425,000, down 10,000 from the previous week. That was slightly better than the 427,000 expected by analysts surveyed by Thomson/IFR.

But some economists consider claims above 400,000 an indicator of a slowing economy. Companies have cut jobs every month this year as they grapple with rising energy costs and tighter credit.

"We didn't get a whole lot of new information," said Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, referring to the reports. He noted that volume was light.

"Exaggerated reactions tend to happen when you have thin trading," he said.

In midafternoon trading, the Dow rose 190.20, or 1.65 percent, to 11,692.71 after rising more than 115 points over the past two sessions following better-than-expected reading on consumer confidence and manufacturing. Still, for the week, stocks are essentially flat after a big decline Monday on credit worries.