U.S. stocks jumped on Thursday after a rise in business productivity and a drop in jobless claims lifted investor confidence in the economy, while strong results from Cisco bolstered tech stocks.

U.S. non-farm productivity rose more than expected in the third quarter as companies squeezed more output from a smaller pool of labor, while fewer U.S. workers filed new jobless insurance claims than forecast last week -- hitting a 10-month low.

The improvement in productivity of 9.5 percent and the decline in jobless claims were very positive numbers, said Hugh Johnson, chief investment officer of Johnson Illington Advisors in Albany, NY.

What this week did was give us our first glimpse of October. And the conclusion you have to reach is that October was a good month for the economy or that the economy is indeed recovering.

Cisco shares gained 2.3 percent to $23.82 after the network equipment company reported earnings late on Wednesday. The technology bellwether posted a stronger-than-expected profit, authorized up to an additional $10 billion in share buybacks and said business was recovering.

The Dow Jones industrial average <.DJI> gained 161.35 points, or 1.65 percent, to 9,963.49. The Standard & Poor's 500 Index <.SPX> added 15.29 points, or 1.46 percent, to 1,061.79. The Nasdaq Composite Index <.IXIC> jumped 45.52 points, or 2.21 percent, to 2,101.04.

On Friday, the Labor Department is expected to report that fewer jobs were cut in October than in the previous month. But the jobless rate is expected to rise to 9.9 percent, exceeding a 26-year high of 9.8 percent in September. Economists polled by Reuters have forecast a loss of 175,000 jobs in October, sharply below the 263,000 jobs cut in the previous month.

Tech stocks climbed across the board, with the NYSE Arca Network index <.NWX> up 1.9 percent, while the PHLX Semiconductor index <.SOXX> climbed 2.4 percent.

Shares of IMS Health Inc soared 23.4 percent to $20.74 after the company agreed to be bought by TPG and CPP Investment board and helped lift the S&P Healthcare index <.GSPA> 1.4 percent. The deal was valued at $5.2 billion, including the assumption of debt.

But CVS Caremark Corp tumbled 20.1 percent to $28.88 after comments from Chief Executive Tom Ryan on weakness in the pharmacy benefit management business.

U.S. retail chains reported October sales that rebounded from the lows in the prior year, but more than half missed Wall Street's heightened expectations as consumers spend selectively headed into the holiday season.

The S&P retail index <.RLX> rose 1.4 percent.

(Reporting by Chuck Mikolajczak; Editing by Jan Paschal)