Stocks rose on Thursday as solid corporate profit reports and a drop in the number of Americans on jobless benefits gave investors reasons to buy equities following the S&P 500's two days of losses.

The market's rally pushed the benchmark S&P 500 index earlier in the session to its highest intraday level in almost nine months, putting it less than 4 points away from the psychologically important 1,000 level. The Nasdaq briefly rose above 2,000 for the first time since October.

But shares lost ground at the close and finished off the day's highs.

The stock market's advance was underpinned by strong demand for the Treasury Department's auction of a record $28 billion of 7-year notes. Strong bids on U.S. debt diminish the chance of a rise in borrowing costs.

The gains were broad-based, but a surge in commodity prices gave an extra boost to raw materials shares. The Reuters/Jefferies CRB index <.CRB>, a gauge of 19 commodities' prices, rose 3.9 percent, its biggest daily percentage gain since mid-March. The S&P materials index <.GSPM> jumped 3 percent.

Companies reporting better-than-expected results on Thursday included MasterCard Inc , up 3 percent at $194.11, and industrial conglomerate Tyco International Ltd , up 2.9 percent at $29.64.

Shares of Motorola Inc shot up 9.4 percent to $7.19 as the world's No. 3 cellphone maker behind Nokia and Samsung cut costs and shipped more phones than expected, and beat analysts' expectations.

We are now in a market where the momentum is so strong that people typically say (it) is overbought, said Steve Goldman, market strategist at Weeden & Co in Greenwich, Connecticut.

In actuality, it's the type of strength that leads to further gains, and pullbacks tend to be shallow.

The Dow Jones industrial average <.DJI> added 83.74 points, or 0.92 percent, to close at 9,154.46. The Standard & Poor's 500 Index <.SPX> rose 11.60 points, or 1.19 percent, to 986.75. The Nasdaq Composite Index <.IXIC> gained 16.54 points, or 0.84 percent, to 1,984.30.

The S&P 500 is up 45.9 percent from the 12-year closing low of March 9, but it's still down 37.4 percent from its record high close in October 2007.

On the economic front, U.S. government data showed initial claims for state unemployment insurance benefits rose slightly above market expectations in the week ended July 25.

However, the four-week moving average for new claims, considered a better gauge of underlying trends as it smoothes out volatility, fell to its lowest level since January.

Goldman Sachs upgraded General Electric to buy as they believe it is less likely that GE will have to spin off its finance arm, GE Capital.

GE's stock shot up 6.9 percent to $13.11 on the New York Stock Exchange.

Among the Nasdaq's bellwethers, UBS initiated coverage of Internet companies Google Inc and Inc with buy ratings; shares of both companies rose slightly over 2 percent.

So far, 75 percent of the S&P 500 companies that have reported quarterly results have beaten expectations, according to Thomson Reuters data.

Volume was nearly average on the New York Stock Exchange, where about 1.36 billion shares changed hands, not far below last year's estimated daily average of 1.49 billion. But on the Nasdaq, about 2.55 billion shares traded, exceeding last year's daily average of 2.28 billion.

Advancers outnumbered decliners on the NYSE by a ratio of about 4 to 1, while on the Nasdaq, about nine stocks rose for every four that fell.

(Reporting by Rodrigo Campos; Editing by Jan Paschal)