Stocks rose in another thinly traded session on Thursday, putting the S&P on track for its third straight advance after data pointed to ongoing improvement in the labor market and reinforced expectations for a rally into the end of the year.

With the string of gains, the benchmark index has eroded year-to-date losses and was near break-even for the year, while the Dow was higher on the year and the Nasdaq continued to be in the red.

New claims for jobless benefits hit a 3-1/2-year low last week, bolstering the view the economy was gaining momentum. The stagnant labor market has been a major worry, and recent signs of life have helped lift stock prices.

Cyclicals were the day's top gainers, with financials <.GSPF> gaining 2.1 percent, followed by energy <.GSPE> up 1.3 percent and materials <.GSPM>, up 1.1 percent.

Consumer staples <.GSPS>, considered a defensive play, was the weakest group, off 0.4 percent.

The CBOE Volatility index <.VIX> fell 1.9 percent and is down about 14 percent so far this week, putting it on track for four weeks of declines.

Many traders bet a rally into year-end would turn the S&P 500 positive for the year. The index is up 2 percent this week, after rallying 3 percent on Tuesday.

The jobless data was positive this morning, and is the kind of news that has some people revising their GDP forecasts to be a bit better, said Frank Davis, director of sales and trading at LEK Securities in New York. So long as no dire news comes out, I expect us to edge up through the end of the year.

Also helping equities, U.S. consumer sentiment improved in December to its highest level in six months as Americans felt better about the economy's prospects.

The Dow Jones industrial average <.DJI> was up 72.39 points, or 0.60 percent, at 12,180.13. The Standard & Poor's 500 Index <.SPX> was up 11.06 points, or 0.89 percent, at 1,254.78. The Nasdaq Composite Index <.IXIC> was up 23.44 points, or 0.91 percent, at 2,601.41.

Recent gains have lifted the S&P 500 above its 50-day moving average, but the index has run into trouble when it sought to move above its 200-day moving average, currently around 1,260. The levels have been key for the market this year.

Lower volume ahead of the Christmas and New Year's Day holidays has left the market susceptible to the heightened volatility this week.

Investors warned that a year-end rally should not necessarily translate into elevated expectations for 2012 because many of the issues that hit market this year, such as slow growth and Europe's debt crisis, remained unresolved.

A downward revision of the Commerce Department's figures on third-quarter economic growth had little impact on stocks, with investors focused on the economy's performance in the fourth quarter.

The Commerce Department said the economy grew at a 1.8 percent annual pace in the third quarter, down from its prior estimate of 2 percent.

Among active stocks, Yahoo Inc advanced 0.7 percent to $16.09 after sources said the Internet media group may unload stakes in its prized Asian assets as part of a complicated share transaction.

Micron Technology Inc jumped 17 percent to $6.46 as investors looked past limp quarterly results late Wednesday and focused on a potential 2012 rebound in long-stagnant memory chip demand and prices.

Tibco Software Inc climbed nearly 10 percent to $24.13 after the business software maker forecast first-quarter revenue above estimates and said fourth-quarter profit and revenues soared.

American Greetings Corp slumped 23 percent to $13.01 after third-quarter profit dropped nearly 40 percent and warned 2012 cash flow would be hurt by higher expenses.

(Reporting By Ryan Vlastelica; editing by Jeffrey Benkoe)