The Dow and S&P climbed more than 2 percent on Thursday, with the Nasdaq not far behind as China's confirmation of strong export data relieved recovery concerns and helped lift the euro.
The market rebounded from a late sell-off on Wednesday, led by a sharp drop in BP and other energy shares.
China confirmed that exports jumped 50 percent in May from a year ago, reassuring investors about the global economy in the face of the euro-zone debt crisis, and pushing energy and materials stocks higher.
The data shows that there's enough worldwide demand for Chinese products to allow it to remain the engine of economic growth, said Jim Awad, managing director of Zephyr Management in New York.
Energy shares gave one of the biggest boosts to the market, with the S&P energy sector <.GSPE> up 3.7 percent, making it the top percentage gainer among S&P sectors. July U.S. crude futures rose 1.4 percent, or $1.01, to $75.39 a barrel following the Chinese data and after the International Energy Administration raised its estimate for oil demand growth in 2010.
U.S.-listed shares of BP Plc climbed 9.5 percent to $31.93. The stock, the second most active on the New York Stock Exchange, rebounded from Wednesday's steep sell-off where the ADR hit a multi-year low on concerns about how the company will cope with the costs of the oil spill in the Gulf of Mexico.
The Dow Jones industrial average <.DJI> was up 217.05 points, or 2.19 percent, at 10,116.30. The Standard & Poor's 500 Index <.SPX> was up 22.84 points, or 2.16 percent, at 1,078.53. The Nasdaq Composite Index <.IXIC> was up 39.88 points, or 1.85 percent, at 2,198.73.
Stocks retreated from session highs as Goldman Sachs Group Inc fell 3.5 percent to $131.96, the top percentage decliner on the S&P 500. According to a report in the Financial Times, the Securities and Exchange Commission is investigating another mortgage-linked deal once pitched by the Wall Street firm.
In Wednesday's trading, the U.S. stock market also enjoyed a strong rally though late-day concerns about BP pushed the three major indexes into negative territory at the close.
The markets consistently fail to hold intraday gains, which suggests there isn't much confidence in the buying, said Douglas Peta, an independent market strategist in New York.
Before the opening bell, the government reported that the number of U.S. workers filing new unemployment claims fell less than expected last week, while the international trade deficit widened slightly in April, pointing to a moderate economic recovery.
People were expecting a much worse claims number, given the payroll results we just had, said Thomas Nyheim, portfolio manager at Christiana Bank & Trust Co. in Greenville, Delaware. It suggests the labor market is improving, though very slowly.
Earlier in the week, the Dow and the S&P 500 posted two consecutive days of moves greater than 1 percent, a reminder that volatility hasn't gone away. By Thursday afternoon, the CBOE Volatility Index <.VIX>, or VIX, fell 7.2 percent to 31.29.
The euro advanced 0.9 percent against the dollar as strong demand in a Spanish bond auction eased concerns about how the country will fund its large debt and in response to the Chinese data.
U.S. stocks have been closely tied to the euro's movement as investors use the currency as a barometer for confidence in the euro-zone economy.
(Reporting by Ryan Vlastelica; Editing by Jan Paschal)