The Dow Jones industrial average rose 123.13 points to close at 12,904.08, its third triple-digit gain this year. It was the highest close for the Dow since May 19, 2008, four months before the worst of the financial crisis.

As the Dow moved to within sight of 13,000, applause broke out at the closing bell on the floor of the New York Stock Exchange.

The Standard & Poor's 500 rose 14.81 points to 1,358.04, its highest close in nine and a half months. The Nasdaq composite, which has had an even stronger year than the Dow and S&P and is trading at its highest since 2000, rose 44.02 points to 2,959.85.

The rally was broad, with all but one of the 30 stocks in the Dow, Kraft Foods, closing higher. All 10 industry groups in the S&P were comfortably higher, led by materials stocks, including strong showings from DuPont and Dow Chemical.

General Motors was among the best-performing stocks of the day. Two years after it was almost wiped out, the company turned a record $7.6 billion profit last year, bigger even than when Americans couldn't stop buying trucks and SUVs.

Microsoft rose 4 percent, as did Bank of America, which tends to swing wildly with the market.

The Labor Department said weekly applications for unemployment benefits dropped for the fourth time in five weeks to the lowest point since March 2008. That was when the jobless rate was just 5.1 percent, far below the current rate of 8.3 percent.

Construction of single-family homes cooled slightly in January, but a rise in permits suggested builders were growing more confident that more buyers are ready to come off the sidelines.

There are doubts about how long the momentum can be sustained, and even questions about what's sustaining it.

The market has seemed determined to move higher this year, despite mostly incremental and vague news about the Greek debt crisis and sometimes-conflicting reports on the U.S. economy.

Still, the hopeful signs about the economy increased investors' appetite for higher-risk investments like stocks, and they moved money out of bonds to make room in their portfolios.

The more important story is what clearly is a continuing U.S. recovery,'' said Tim Speiss, chairman of personal wealth advisers at EisnerAmper. ``I could go find some negative news report, but it would go against what investors are doing.''

The yield on the government's benchmark 10-year Treasury note, which moves in the opposite direction from its price, was at 1.92 percent before the report on jobless claims. It jumped to 1.96 percent in minutes.

Before the jobs news came out, the euro was sitting at a three-week low against the dollar. But it rallied almost a full penny, to $1.3143 from $1.3063 late Wednesday.