Stocks rose on Thursday as a brokerage's upbeat view on U.S. banks drove a run-up in financials, while soaring prices of oil and other commodities lifted natural resource companies on bets the economic slump is waning.
RBC Capital Markets upgraded the banking sector, saying it is poised for a multiyear bull market.
The KBW bank index <.BKX> added 4.8 percent.
A surge in crude oil prices underpinned the broader market after Goldman Sachs raised its year-end oil price forecast to $85 a barrel, saying economic stabilization and tight supplies should bode well for prices.
U.S. crude settled up 4 percent at $68.81 a barrel on the New York Mercantile Exchange.
The bigger gain in oil, not just today, is encouraging on the macro level. It's indicative of demand, said Cleveland Rueckert, market analyst at Birinyi Associates Inc, in Stamford, Connecticut.
But Rueckert said he preferred for oil to hold around $60 barrel. You don't want to have the same thing that happened last year when it ... becomes a burden to a lot of the consumers who are supposed to drive economic growth.
The Dow Jones industrial average <.DJI> gained 74.96 points, or 0.86 percent, to 8,750.24. The Standard & Poor's 500 Index <.SPX> climbed 10.70 points, or 1.15 percent, to 942.46. The Nasdaq Composite Index <.IXIC> rose 24.10 points, or 1.32 percent, to 1,850.02.
A broad run-up in commodities prices lifted shares of basic material companies, with Alcoa Inc
The S&P materials index <.GSPM> gained 2.2 percent, while the gold BUGS index <.HUI> rose 3.3 percent.
Shares of Caterpillar Inc
Among bank stocks, shares of Bank of America
Shares of JPMorgan Chase
The brokerages' positive views on the financial sector is of keen interest to investors, with the government still trying to resuscitate the sector to support the economic recovery.
Plane maker Boeing
In the energy sector, Chevron Corp
The S&P energy index <.GSPE> rose 2 percent.
Thursday's economic reports generally supported expectations that the recession-hit economy is starting to improve, albeit with some misgivings about disappointing May sales reported by major retailers.
On the Nasdaq, Apple Inc
Government data showed U.S. non-farm productivity rose by 1.6 percent in the first quarter, much stronger than initially estimated, while the number of workers filing new claims for jobless benefits fell last week.
Investors, however, are cautious about what Friday's report on U.S. employment might reveal as they look for more definitive signs that the recession that begun in December 2007 is easing. Since hitting a 12-year low on March 9, the S&P 500 has risen nearly 40 percent.
(Editing by Kenneth Barry)