The government said weekly initial jobless claims declined to 368,000 versus a forecast of 398,000, one day after a similarly strong ADP report on private sector hiring. Taken together, the two could raise optimism for Friday's payrolls report.
As each week goes by that we're seeing claims under 400,000, we get closer to the level where we can start expecting faster job creation, said Mike Gibbs, managing director and chief market strategist at Morgan Keegan in Memphis, Tennessee.
The Arab League said a peace plan for Libya was under consideration, and while have some have questioned the substance of the proposal, put forth by Venezuela's Hugo Chavez, a resolution could remove a major headwind to equities.
Crude prices have spiked in recent weeks on concerns the unrest in Libya could lead to supply disruptions, resulting in a corresponding drop in stocks as market participants fretted that high energy costs will weigh on economic activity.
April crude futures fell 1 percent but was still above the key $100 per barrel level. Brent crude oil was down 1.3 percent.
If there was a peace agreement, crude oil could trade down to around $94 to $95 per barrel, Gibbs said. But the jury is still out on whether we've seen the full extent of the issue since we've seen so much more trading volume on down days than up days.
S&P 500 futures rose 11.5 points and were above fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration on the contract. Dow Jones industrial average futures added 91 points and Nasdaq 100 futures jumped 21 points.
Several top retailers posted bigger-than-expected sales gains for February, a show of strength that could dissipate in March as a late Easter and rising gasoline prices take their toll.
Big Lots Inc shares rose 3.2 percent to $41.18 after it posted quarterly earnings that beat estimates and forecast strong 2011 profits.
H.J. Heinz Co rose 1.4 percent to $49.69 before the bell after its third-quarter income topped expectations and it said it was buying a 80 percent stake in a Brazilian food maker.
The Institute for Supply Management's February non-manufacturing index, to be released at 10 a.m. EST, is seen rising to 59.5 from 59.4 in January.
Stocks eked out gains on light volume on Wednesday despite another rise in oil prices, as investors bet the latest data signaled the economy could absorb expected higher energy costs.
(Editing by Jeffrey Benkoe)