The Dow Jones Industrial Average ended with triple-digit gains and the S&P 500 also saw strong gains. Meanwhile, the tech-heavy Nasdaq Composite was a notable laggard in the wake of recent gains for technology shares.
Financial stocks led the broader market higher following news of a financing deal for Countrywide Financial, the nation's largest mortgage broker. The trader said Thursday's action in financial sector was noteworthy.
"Financials don't have to lead this market but they need to reverse the recent implosion for the market to go higher," said Clark.
Solid employment data also added to positive market sentiment. Weekly jobless claims rose by 4,000 to 319,000 last week.
"Jobless claims came in slightly better than expected, which was positive in light of Friday's jobs report," said Mike Malone, trading analyst at Cowen & Co. "Also, Countrywide was able to secure some additional financing. The combination of those two factors is helping to drive the market."
Countrywide said it has lined up $12 billion of secured financing to help cope with a housing slowdown.
"The selling stampede ended on August 16th and we were going to get a throwback rally," said Jeffrey Saut of Raymond James.
Shares of General Motors and McDonald's rose more than 6% and helped propel the Dow to triple-digit gains. Energy stocks such as Exxon Mobil were also strong as oil continued to trade above $79 a barrel.
GM rose after a Citigroup analyst recommended the stock as a buy. Wall Street was also more optimistic about the outcome of GM's labor negotiations.
Consumer discretionary stocks moved higher. Dow component McDonald's also rose sharply after the world's largest fast-food chain increased its dividend and the amount of cash it expects to return to shareholders.
Retailer Target said on Wednesday it would review options, including a possible sale, for its credit-card assets, and it would also evaluate its use of debt and the pace of stock buybacks.
Shares of Kohl's jumped as much as 7% on Thursday as the mid-priced department store dropped prices on its new Vera Wang line by as much as a third. Analysts said the markdowns bring the prices of Wang's collection more in line with Kohl's typical fare, but that even without the markdowns it has been selling well.
New York light sweet crude futures hovered just below $80 a barrel, with dealers focused on tight inventories in the U.S. and potential supply disruptions from a hurricane in the Gulf of Mexico.
"I think a lot of our ability to look over high energy prices has a lot to do with the fact that we're making the assumption that the Fed is going to cut by at least 25 basis points," said Arthur Hogan, managing director at Jefferies. "I think the debate has gone from, does the Fed cut or not, into how much does the Fed cut by."
Natural gas supplies rose 64 billion cubic feet, roughly in line with expectations. A Dow Jones survey estimated inventories would rise by 65.3 billion cubic feet.
Treasury prices fell, sending yields higher.
European stocks closed higher, while Asian markets closed mostly higher Thursday in very choppy trading.