U.S.stocks closed higher on Thursday at August highs despite subpar economic data around the world, and after conciliatory remarks from Russian President Vladimir Putin eased geopolitical concerns.
Healthcare, utilities and transports, led by airlines, headed market gains in the close, with a below-average composite volume of 2.6 billion on the New York Stock Exchange.
Analysts said stocks continue to trade as though bad news was actually good news on the view it will keep the Fed engaged with policy easing.
"I think that the market is saying awful news is okay because it gives us our juice for longer. We kind of hoped we'd start to trade on earnings trends," said Gina Martin Adams, institutional equity strategist at Wells Fargo Securities. "But earnings don't matter. In earnings season, stocks fell and it was the best earnings season we've seen in years."
Earlier, U.S. stocks followed European stocks, which closed higher on Thursday despite flat GDP growth across the Eurozone, below expectations, and the first contraction in over a year of Germany's economy still signaled underlying stress.
"I would be likely to overlook the cheeriness of the market because of low volume," said Kim Forrest, equity analyst at Fort Pitt Capital. "I think it's huge. A little bit of enthusiasm can go a long way."
Other analysts attributed low volume to the vacation season and called the stock rally "momentum" and "noise," especially with rising bond prices and options expirations on Friday.
Rather than increasing ahead of the deadline, options volume is down 11 percent. J J Kinahan, chief strategist at TD Ameritrade called the decline "an anomaly." But he considered lighter volume a near-term bullish sign that could push stocks higher.
Investors will also weigh PPI and industrial production figures that come out on Friday morning, which might shift focus to inflation away from geopolitics, said Peter Boockvar, chief market analyst at The Lindsey Group.
Perrigo led the S&P with gains of more than 7 percent after the maker of over-the-counter store brand drugs reported better-than-expected fourth-quarter results. Biotech firms Amgen and Gilead reached record prices, as did blue-chip gainers Walt Disney and Home Depot.
"Biotech sold off too much in mid-April," said Nick Raich, CEO of The Earnings Scout. "They have some of the best earnings trends. Their outperformance has been justified."
On Thursday morning, the Department of Labor reported an increase to 311,000 in claims for unemployment benefits, above forecasts of 295,000. But the four-week average of claims, considered a better measure of labor market trends as it irons out week-to-week volatility, rose 2,000 to 295,750, still pointing to firming job market conditions.