NEW YORK — Wall Street rose sharply Thursday after investors got some comforting news about the economy — some better-than-expected retail sales in May and a drop in the number of laid-off workers seeking unemployment benefits. The Dow Jones industrials rose more than 130 points.

The market got an additional boost from word that Verizon Wireless will acquire Alltel Communications LLC for $5.9 billion in cash and the assumption of $22.2 billion in debt.

The Labor Department's report that applications for unemployment benefits came in at 357,000 — a decline of 18,000 from the previous week — offered investors some relief about the health of the job market a day ahead of a key monthly reading.

While the weekly readings can show volatility, the latest drop left applications for benefits at their lowest level since mid-April. Still, the four-week average for those getting benefits rose to 3.086 million, the highest since March 2004.

Among retailers reporting solid May results, Wal-Mart Stores Inc. said sales at stores open at least a year rose as consumers sought bargains.

Subodh Kumar, global investment strategist at Subodh Kumar & Assoc. in Toronto, said the jobs figures and the Verizon Wireless deal offer some investors reassurance about the health of the economy.

"It looks like the U.S. is not in recession but, I would say, tepid growth," he said, adding that the Verizon bid for Alltel is "encouraging."

"Companies are willing to invest in their businesses," Kumar said.

In midafternoon trading, the Dow rose 137.44, or 1.11 percent, to 12,527.92.

Broader stock indicators also rose. The Standard & Poor's 500 index advanced 18.08, or 1.31 percent, to 1,395.28, and the Nasdaq composite index rose 33.10, or 1.32 percent, to 2,536.24.

The Russell 2000 index of smaller companies rose 14.17, or 1.91 percent, to 757.88.

Stocks finished mixed Wednesday following sizable declines in the first two sessions of the week.

Bond prices fell Thursday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.02 percent from 3.98 percent late Wednesday. The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude oil rose $5.71 to $128.01 a barrel on the New York Mercantile Exchange.

The weekly jobs report came as investors continue to grapple with concerns about tightness in the credit market, the effect of still-high energy prices and a slumping housing market.

With the weekly jobs numbers in hand, Wall Street was looking ahead to the Labor Department's monthly employment reading, due Friday morning. That report often draws widespread attention because a spike in unemployment could upend consumer spending, which accounts for more than two-thirds of U.S. economic activity.

"I think tomorrow will be somewhat of a similar kind of a day in the sense that if the news is at or above expectations I think investors may be willing to buy in," Kumar said, referring to Friday's employment report.

Alfred E. Goldman, chief market strategist at Wachovia Securities, contends the market is entering a stronger period because of investors' ability to not overreact to some bad news such as rising oil prices and a weak dollar and to focus instead on the retail sales and jobless claims numbers.

"What investors are doing is looking beyond the valley to the peaks ahead," he said. "The big picture is that we're in a market that's transitioning from a bear to a bull."

Goldman said the market will still likely continue in fits and starts as investors look for further signs about the well-being of the economy.

"This is not going to be a one-way street up. I think it's going to be a more dull, churning market. After anybody has surgery you don't jump off the operating table and do the jitterbug. They keep you on the operating table," he said, alluding to a possibly gradual recovery in the market from concerns about bad credit and woes in the housing industry.

In corporate news, Verizon Communications Inc. rose $2, or 5.4 percent, to $38.99 after the announcement of Verizon Wireless' deal. Verizon Wireless is a joint venture between Verizon Communications and Vodafone PLC. Alltel was sold to TPG Capital and a unit of Goldman Sachs Group in a $27.5 billion leveraged buyout about seven months ago.

If completed, the deal would push Verizon Wireless past AT&T Inc. to become the biggest operator in the U.S.

Continental Airlines Inc. rose 85 cents, or 5.8 percent, to $15.35 after announcing plans to cut 3,000 jobs and reduce its capacity in the fourth quarter by 11 percent as it grapples with surging jet fuel prices. Company officials said the industry's business model "doesn't work with the current price of fuel."

Wal-Mart said its May same-store sales rose 4.4 percent. Excluding the effect of fuel sales, same-store sales rose 3.9 percent. The stock, which like Verizon Communications is one of the 30 that comprise the Dow industrials, rose $1.94, or 3.4 percent, to $59.62.

Advancing issues outnumbered decliners by more than 3 to 1 on the New York Stock Exchange, where volume came to 724.5 million shares.

Overseas, Japan's Nikkei stock average finished down 0.65 percent. Britain's FTSE 100 finished up 0.42 percent, Germany's DAX index declined 0.34 percent, and France's CAC-40 fell 0.16 percent.