Buying accelerated in the late afternoon, triggered by program trading related to tomorrow’s quadruple-witching day, the quarterly expiration of index futures and options as well as individual stock futures and options, analysts said.

"We do have a backdrop of better economic data which is helping lifting things," said Todd Clark, head of listed equity trading at Wells Fargo Securities. "But it’s the forces surrounding tomorrow’s expiration which are really driving the market."

The Dow closed up 102.82, or 1 percent, at 10,248.08, for a three-day gain of 225 points, according to preliminary calculations. It was the highest close since May 17, 2002, when the blue-chip average stood at 10,353.08.

The broader market also finished higher. The Nasdaq composite index gained 34.85, or 1.8 percent, to 1,956.18.

And the Standard & Poor’s 500 index rose 12.69, or 1.2 percent, to 1,089.17. It was the highest level since May 23, 2002, when the index closed at 1,097.08.

The Labor Department reported today that new jobless claims fell last week by a seasonally adjusted 22,000 to 353,000, the lowest level since Nov. 1. The decline was much larger than analysts’ expectations.

Meanwhile, the Conference Board reported that its Composite Index of Leading Economic Indicators rose to 114.2 last month, offering hope that the economic recovery was gaining momentum. The 0.3 percent rise was in line with analysts’ expectations.

And the Federal Reserve Bank of Philadelphia said its business conditions index rose to 32.1 in December, up from 25.9 in November, the seventh straight month of gains. Economists were expecting a more modest reading of 25.

"The numbers show that the jobs situation might be better than people expected all along ... and the economy is actually going well," said Tim Smalls, trader at SG Cowen Securities.

Stocks have gained in recent weeks as strong economic data have reinforced investors’ expectations of a solid rebound. Still, analysts wonder if stock valuations might be getting a bit pricey.

American Express Co. climbed $1.77 to $46.77 after UBS raised the financial company’s stock rating to "buy" from "neutral."

Bed Bath & Beyond jumped $2.21 to $42.17 after the retailer posted quarterly profits that came in higher than analysts’ projections.

Honeywell International Inc. rose $1.31 to $31.57 after J.P. Morgan upgraded the company’s stock rating to "overweight" from "neutral."

Decliners included Morgan Stanley, which fell $1.29 to $56.34, even though the brokerage firm reported quarterly earnings that beat Wall Street’s estimates by 4 cents per share.