Stocks added to an already strong session following an auction on seven-year Treasury notes that heightened a sense of economic optimism.
Dow industrials briefly hit a 2 percent gain and the Nasdaq added to torrid gains as bulls plowed into consumer stocks and industrials.
Investors bought even amid fresh signals that the economy still has a ways to go before recovering, and as most major bank shares turning negative with Citigroup leading Dow losers.
Among the big movers on the tech side were Research in Motion , on news that the Blackberry smartphone marker is planning to launch a full-length television service, and Sears Holding, a company under fire since a downgrade from Moody's earlier this week.
Intel also gained nearly 5 percent as investors seemed to applaud IBM's rumored acquisition of Sun Microsystems, at least for its impact on Intel. The company supplies servers for both IBM and Sun.
General Motors led the early move higher on sentiment that the Obama administration's auto task force is preparing to approve a round of loans for the big automakers that will avert bankruptcy.
GM shares surged on the developments and the company led gainers on the Dow 30. CNBC.com-parent General Electric was among the most actively traded for the day, gaining as the company looks to assure investors that it is addressing problems with its financing unit.
Treasury Secretary Tim Geithner testified before the House Financial Services Committeeand outlined an expansion of federal oversight on the financial markets. Stocks traded in a tight range during the morning an investors appeared to be unfazed by the Geithner testimony.
Stocks also could stand to gain on news that the Securities and Exchange Commission is close to reinstituting the uptick rule for trading. The rule prohibits short-selling stocks until after they have a move higher and is regarded as a stop-gap against trader assaults on particular companies.
Investors also weighed whether the economy in fact was showing signs of recovery after a spate of reports on housing and other activities that were surprisingly positive.
In separate reports, the government said continuing jobless claims reached a new record of 5.56 million, while final GDP numbers reflected a negative 6.3 percent growth rate, worse than the original stated figure but better than analyst estimates.
Electronics retailer Best Buy also helped create momentum after reporting earnings that beat analyst expectations, sending shares up.
In other earnings, ConAgra reported falling profits but not as much as Wall Street had expected, sending shares higher as the company reaffirmed its 2009 earnings forecast.
And shares surged for Dr. Pepper Snapple Group as the soft drink maker posted earnings of 39 cents a share, slightly ahead of Wall Street estimates even as the company forecast weakening demand for its high-end brands.
Asian stocks closed in positive territory but European shares turned negative, pulled down by financials.
In Europe, AIG executives said returning bonuses amounts to "blackmail" and some of them have threatened they would resign.
In another sign that the global flight from risky assets has continued, Man Group, the world's largest listed hedge fund firm, said funds under management fell 11 percent from end-December to $47.7 billion, down, as clients pulled out assets in the face of falling markets.
Market breadth was increasingly positive, with gainers beating losers 3 to 1 as about 635 million shares changed hands on the New York Stock Exchange by 12:30 pm. There were nine new highs and no new lows.