Wall Street jumped on Thursday after signs of life in the labor market and strong sales at some U.S. retailers lifted optimism in the economy ahead of Friday's key June jobs report.

Data from payrolls processor ADP showing U.S. private hiring increased by more than double expectations coupled with a fall in new claims for jobless benefits raised hopes that a recent slow down in the U.S. economy may only be temporary.

The reports also fueled speculation that Friday's non-farm payrolls report from the Labor Department would provide more evidence of an improving labor market, a key factor if markets are to rally into the end of the year.

If tomorrow's report follows through on today's positive ADP report and comes in above 125,000, that could be enough to push equity markets through the top end of the trading range that we have been in since February and March, said Michael Sheldon, chief market strategist at RDM Financial.

The S&P 500 is likely to run into strong overhead resistance at mid-1,300, according to technical analysts at UBS, about where the index found a ceiling on Thursday,

Failure to break out above major supply will promptly lead to a near-term trading range between 1,258-1,263 and 1,340-1,345, the analysts said in a research note.

Retailers were among the best performers after several top companies reported better-than-expected sales gains for June, using bargains to lure shoppers in an uncertain economy.

Target Corp shares jumped 6.5 percent to $51.59 and Macy's Inc added 3.2 percent to $29.80. The S&P retail index <.RLX> gained 2.1 percent.

The Dow Jones industrial average <.DJI> gained 81.32 points, or 0.64 percent, to 12,707.34. The Standard & Poor's 500 Index <.SPX> added 11.53 points, or 0.86 percent, to 1,350.75. The Nasdaq Composite Index <.IXIC> rose 33.33 points, or 1.18 percent, to 2,867.35.

Employers are expected to have added 90,000 jobs in June in Friday's Labor Department report, according to a poll of economists by Reuters.

The ADP report showed the private sector added 157,000 jobs last month, exceeding expectations for a gain of 68,000.

Stocks have recovered sharply from losses in May and June when the S&P 500 fell around 7 percent. Thursday marks a continuation of a rally last week that pushed the index up 5.6 percent as more investors come to the view that a recent slowdown in the U.S. economy will reverse in the second half.

That is precisely the kind of number the market needs in order to bolster confidence that our soft patch is brief and behind us, said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey. It's definitely the type of green light the market is looking for to move higher.

Major brokerages raised their price targets on Visa Inc a day after the world's largest card processing network said the impact from the Federal Reserve's new debit fee rule was manageable. Visa's stock rose 1.5 percent to $89.52.

There were some glimmers of a potential compromise that would avoid a debt default as President Barack Obama and top congressional leaders searched for ways to break a deadlock over spending and taxes.

However, a small team of U.S. Treasury officials is discussing options to stave off default if Congress fails to raise the country's borrowing limit by an August 2 deadline, sources familiar with the matter said on Wednesday.

(Reporting by Edward Krudy; Editing by Kenneth Barry)