"We had very good economic numbers, the earnings numbers have been fine and all are pointing to a stronger economy going forward," said Neil Massa, equity trader at John Hancock Funds. "The jobless number also looks very promising."

The Nasdaq composite index gained 17.00, or 0.9 percent, to 1,976.37. It was the highest close for the tech-focused index since Jan. 17, 2002, when it stood at 1,985.82.

The Dow Jones industrial average closed up 36.14, or 0.4 percent, at 9,856.97.

And the Standard & Poor’s 500 index rose 6.24, or 0.6 percent, to 1,058.05.

A government report issued before the opening showed new claims for unemployment benefits last week plunged to the lowest level in more than two years. In a separate report, the Labor Department found productivity of U.S. companies in the third quarter registered its best showing since early 2002.

The jobless figures offered a hopeful sign that the battered employment market may be turning a corner. A more important indicator of the labor market’s health — the monthly report for October — is due tomorrow.

Analysts say investors have been somewhat hesitant to buy stocks this week ahead of the key employment numbers. If tomorrow’s results are strong, it could lure more sidelined investors into the market.

"The market is tired," said Russ Koesterich, U.S. equity strategist, State Street Corp. "(Investors) want to see if the rebound in employment has begun. It’s the one part missing in the recovery."

"I would argue the majority of gains are behind us at least in the near term," he added. "The market has done an excellent job of discounting the rebound."

Cisco gained $1.10, or 5.1 percent, to $22.90 after reporting higher-than-expected sales and profits late yesterday. Cisco, the leading maker of routers and switches through which Internet and other network traffic pass, also expanded its outlook for the next quarter.

News Corp. rose 65 cents to $37.13 after reporting strong earnings, largely on higher global sales of video entertainment. The parent company of the Fox News Channel and the Twentieth Century Fox movie studio beat analyst expectations by 9 cents a share in results announced just after the close of regular trading yesterday.

Mutual fund company T. Rowe Price advanced $3.11, or 7.7 percent, to $43.56, after Merrill Lynch raised it to a "buy" from a "neutral." Analysts were betting the firm might win business from other mutual fund companies that are under pressure because of a mounting investigation of trading practices in the industry.

Decliners included Alliance Capital Management, which fell 38 cents to $30.15 after the asset management firm said it is cooperating with state and federal regulators as part of their probe into improper mutual fund trading.