Stocks closed Thursday with solid gains ahead of Friday's highly anticipated employment report as investors remained cautiously optimistic on the future of the U.S. economy.
"We've seen a nice bounce back the last couple of days. The markets were clearly oversold," Phil Orlando, chief equity market strategist at Federated Investors, told CNBC.
But Orlando said he remains wary of another downturn in the stock market. "We don't think this correction has played out completely. Right now we're very cautious. This jobs report tomorrow, we think, is just fraught with peril."
Economists expect the Labor Department to report nonfarm payrolls growth of 100,000, the weakest in two years. Orlando said the data could come in light due to the resumption of cold weather and a sluggish economy.
Thursday's market strength was across the board with all ten S&P 500 sectors closing positive. Breadth remained strong with advancing shares outnumbering declining shares by four to one on the NYSE.
"The health of the market is extremely positive," Paul Desmond, president of Lowry's Reports, told CNBC.com. "Buying is still strong and anyone who wanted to sell stocks did so and are out of the picture."
Positive trading volume seen recently on the New York Stock Exchange, Desmond says, is a strong indicator of further upside. Days in which 90% of trading volume is to the downside -- as occurred with the sharp declines of Feb. 27 -- reflect panic selling, and is typically found near market bottoms, he said.
But that negative trend was reversed earlier this week when 90% of trading volume was to the upside. "We think that the 90% upside day on March 6 represented the end of the correction and the resumption of the bull market," he said. "It tells us that we're back in the uptrend again."
Telecom was the day's top sector by a wide margin as buyers piled into shares of AT&T and Verizon Communications . On Thursday, a federal jury orderedVonage, an Internet phone service provider, to pay Verizon $58 million for patent infringement. Vonage said in a release customers should not expect disruptions in phone service, should the court grant Verizon's pending request to prevent Vonage from using the patented technology.
Retail drugstore chain CVSincreased its takeover offer for Caremark Rx by sweetening a one-time dividend. CVS, which said the revised bid was its "best and final" offer, offered to pay Caremark shareholders $52.96 a share plus a one-time dividend of $7.50 per share, up from $6. Earlier today, Merrill Lynch said Express Scripts could boost its rival offer ahead of Caremark's shareholder vote, set for March 16.
New Century Financial saw shares plunge in afternoon trading on renewed speculation the subprime mortgage lender would seek Chapter 11 bankruptcy protection. The rumors surfaced six days after New Century disclosed a criminal probe into securities trading and accounting, and said its survival might depend on getting help from its own lenders.
The yen resumed its recent decline against the dollar as investors continued to reduce their exposure to the Japanese carry trade and gave stocks an early lift.
"What we've been seeing in the last several sessions is the strong correlation between the yen and the dollar, I think that's really driving the market," said Mike Malone, trading analyst at Cowen and Company, in an interview with CNBC.com.
Big box retailers Wal-Mart Stores and Costco Wholesale both declined on tepid monthly sales data.
New York light crude futures closed lower, falling below $62 a barrel. Treasury prices fell, sending yields higher.
Stocks Close Higher In Europe, Asia
The European Central Bank raised interest rates by a quarter point to 3.75%, as expected, reflecting the region's robust growth and expectations for rising inflation. Banking stocks rose on the news with gains for Barclays and HSBC.
The Paris CAC-40, Germany's DAX , the FTSE-100 in London all closed up more than 1%.
French retailer Carrefour reported a 4.6% rise in earnings before interest and taxes (EBIT), meeting expectations.
The Nikkei 225 Average closed up about 2% as a weaker yen lifted shares of exporters such as Kyocera.
South Korea's Kospi finished higher, gaining for a third day in a row, while Hong Kong blue chips continued to rebound in subdued trading, closing up 1.36%.