Global stocks rose on Thursday as investors zeroed in on encouraging economic data in hopes the equities rally would advance, while crude oil surged on signs of stronger fuel demand and worries over supply disruptions related to Iran.
The European Central Bank's second massive injection of cash also buoyed sentiment in equity markets, lifting European shares more than 1 percent and removing the fear of a meltdown in the banking sector that had cast a pall over debt markets.
They are on the right road, which means that the risks associated with Europe are starting to abate. And that's really good news, said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.
U.S. stocks recouped losses from Wednesday, after the latest data on jobless claims bolstered views of an improving American labour market and solid monthly sales from retailers bolstered investor sentiment.
Gains were muted due to fears that other data signalling slower growth will keep this year's rally, which has pushed major stock indexes to multi-year highs, from climbing much further.
U.S. manufacturing unexpectedly cooled in February, and consumer spending was flat in January for a third straight month after accounting for inflation, casting doubts on the strength of the recovery.
In oil markets, Brent crude rose above $126 a barrel as the data indicating strength in the U.S. economy and Chinese data showing stronger-than-expected factory growth in February drove expectations of strong demand for oil.
The ongoing concerns about disruptions of Iranian oil supplies -- already being reduced in the wake of Western sanctions against Tehran for its disputed nuclear program -- added support.
Brent crude rose $4.10 to $126.76 a barrel. U.S. oil settled up $1.77 at $108.84 per barrel.
On Wall Street investors said that the 13,000 level on the Dow, which was breached on Monday for the first time since May 2008, represented a major psychological barrier for stocks to move ahead.
A lot of the guys on the floor are sensing -- barring some significant event, whether that be geopolitical or relating to the European debt crisis -- we could potentially at some point just explode through, Gordon Charlop, managing director at Rosenblatt Securities in New York.
The Dow Jones industrial average was up 35.76 points, or 0.28 percent, at 12,987.83. The Standard & Poor's 500 Index was up 9.02 points, or 0.66 percent, at 1,374.70. The Nasdaq Composite Index was up 26.53 points, or 0.89 percent, at 2,993.42.
Also supporting gains on Thursday, major U.S. automakers posted stronger sales in February.
Shares of Ford Motor Co rose 2.7 percent, and shares of General Motors rose 2.0 percent.
Euro zone bank shares rose 2.6 percent after French and Spanish government borrowing costs fell at auctions and yields on Italian notes dropped on the secondary market, following the ECB's cash injection on Wednesday.
Italian banks, which own the lion's share of the country's debt, led gainers with Banco Popolare rising 10.5 percent and UniCredit up 5.8 percent.
The FTSEurofirst 300 index of top European shares ended 1.1 percent higher at 1,086.72 points.
The funding risk in the banking system has reduced substantially, Dennis Jose, strategist at Barclays Capital, said. The risk the sovereign having to eventually bail out the banks has also reduced with the ECB's liquidity measure.
But gains were limited as key benchmark indexes in Europe and on Wall Street failed to convincingly break above major resistance levels as a brisk 2-1/2-month rally loses steam.
The euro was fell slightly in volatile trading after falling to a one-week low on initial concerns over U.S. economic data.
The euro was down slightly 0.1 percent at $1.3312.
Remarks by Federal Reserve Chairman Ben Bernanke had little impact on the market. Bernanke said he was worried that the rapid decline in U.S. unemployment may not be sustained.
Bernanke's prepared remarks on Thursday were mostly a repeat of the prior day's testimony, when he stopped short of signalling a further easing of monetary policy, which some in the market had expected.
The euro had been weak before New York opened, after the ECB's huge cash injection reminded investors of the region's debt overhang and the fragile euro zone economy.
U.S. Treasury debt prices fell as some investors pushed back the timing of another potential round of easing by the Fed, and riskier assets did better at the expense of safe-haven U.S. debt.
U.S. Treasuries prices briefly pared early losses after the Institute for Supply Management said its index of U.S. factory activity fell to 52.4 from 54.1 the month before. The reading was shy of expectations of 54.5, according to a Reuters poll of economists. A reading above the 50 mark indicates expansion.
Benchmark 10-year notes were off 17/32 in price to yield 2.03 percent.
(Additional reporting by Ellen Freilich, Chuck Mikolajczak and Nick Olivari; Editing by Leslie Adler and Andrea Evans)
(Corrects ticker symbol of UniCredit in paragraph 16)