Wall Street opened higher on Thursday as strong uptake by investors in Greece's debt swap fed optimism a deal could be completed by a deadline later in the day, staving off a messy default.
A Greek official said the percentage of debtholders accepting a deal was very high, adding the government was hopeful ahead of a 3 p.m. EST (2000 GMT) deadline.
Greece must have bailout funds cleared by March 20, when a payment is due. A missed payment could throw the country into default and destabilize the region's financial system.
In a familiar pattern, bank and commodity-related stocks rose. Investors have bought and sold the sectors this week as risk aversion ebbed and flowed ahead of the Greek deal. Morgan Stanley rose 1.6 percent to $18.16, while Alcoa Inc gained 1.4 percent to $9.68.
The expectation that a deal will go through on Greece is setting a positive tone for the market this morning, said Michael Sheldon, chief market strategist at RDM Financial, Westport, Connecticut.
But he warned: The pieces are falling into place for a moderate pullback, but a lot will depend on how the market interprets the Greek deal.
The Dow Jones industrial average <.DJI> was up 56.01 points, or 0.44 percent, at 12,893.34. The Standard & Poor's 500 Index <.SPX> put on 8.35 points, or 0.62 percent, at 1,360.98. The Nasdaq Composite Index <.IXIC> rose 18.24 points, or 0.62 percent, at 2,953.93.
The S&P, up nearly 24 percent from October closing lows, reached a high this year of 1378.04, a level analysts say will be tough to break through.
New U.S. claims for unemployment benefits unexpectedly rose last week, but was not enough to change perceptions the labor market was strengthening, a key factor in the current rally. The data comes ahead of the closely watched payrolls report Friday.
McDonald's Corp fell 3 percent to $97.12 after the hamburger chain reported a smaller-than-expected rise in February sales, weighed down by weakness in Europe and Asia-Pacific, the Middle East and Africa.
The European Central Bank (ECB) held interest rates at 1.0 percent for the third month running, while the Bank of England also left its monetary policy unchanged.
ECB staff forecast the economy could shrink by 0.5 percent this year and at best grow by a meager 0.3 percent, a slight downgrade of its previous estimate.
Brazil slashed rates more than expected on Wednesday, stepping up a battle to revive struggling industries that threaten to derail a recovery in Latin America's largest economy.
In a potential wild card for markets, a strong geomagnetic storm was racing from the sun toward Earth, and its expected arrival later Thursday could affect power grids, air travel and space-based satellite navigation systems, experts said.
(Reporting by Edward Krudy; editing by Jeffrey Benkoe)