Broader stock indicators also rose. The Standard & Poor's 500 index advanced 16.13, or 1.26 percent, to 1,297.79, and the Nasdaq composite index rose 28.84, or 1.21 percent, to 2,411.30.

Bonds fell as investors moved into stocks. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.79 percent from 3.77 percent late Wednesday. The dollar rose against other major currencies, as did gold prices.

"This is an environment in which we're likely to get a lot of head-fakes both on the upside and the downside," said Bill Urban, principal with San Francisco-based Bingham, Osborn & Scarborough, referring to economic data. He noted that the initial reading on the fourth quarter last year had been positive before revisions revealed the economy contracted.

"This is just sort of data that trickles out that can be very positive one day and negative the next. We don't yet think it signals a trend," he said.

Investors are watching oil prices as Tropical Storm Gustav churns toward the Gulf of Mexico on a course that could collide with oil and gas platforms. But strength in the dollar helped drive down the price of oil.

Light, sweet crude fell $2.56 to settle at $115.59 on the New York Mercantile Exchange.

The decline in oil made energy stocks one of the few areas of weakness Thursday.

Devon Energy Corp. fell $4.18, or 3.9 percent, to $102.60, while Hess Corp. fell $2.37, or 2.2 percent, to $104.77.

In corporate news, Sears Holdings Corp. said its second-quarter profit fell 62 percent as weak consumer spending continues to hamper store sales. The retailer earned $65 million, or 50 cents per share, in the three-month period ended Aug. 2. That compares with $173 million, or $1.15 per share, in the year-ago period. The stock rose $2.38, or 2.7 percent, to $89.36.

Tiffany & Co. jumped $4.31, or 11 percent, to $43.92 after reporting that its second-quarter profit doubled as sales rose by double-digit percentages in Asia and Europe.

Zale Corp. forecast a fiscal 2009 profit above what Wall Street had expected, though it warned that same-store sales may decline. The specialty jeweler also reported a fiscal fourth-quarter loss as it continued reducing inventory levels. Zale rose $4.89, or 21 percent, to $28.04.

Investors have been looking to retailers' results for information not only about the companies, but about consumers' ability to spend. Several upbeat reports Wednesday from retailers helped buoy Wall Street's confidence in the economy.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where volume came to 598.7 million shares.

The Russell 2000 index of smaller companies rose 13.28, or 1.81 percent, to 746.23.

Overseas, Japan's Nikkei stock average rose 0.12 percent. Britain's FTSE 100 rose 1.32 percent, Germany's DAX index fell 1.57 percent, and France's CAC-40 jumped 2.02 percent.