The Dow finished at an all-time high on investor optimism about the strength of the economy.
The Dow Jones Industrial Average closed at an all-time high of 12673.68, topping the previous record close of 12621.77 recorded on Jan. 24. The S&P 500 also finished higher while the Nasdaq, which spent much of the day's session flat, managed to eke out a small gain.
"We are at a moment in time when everything looks about right: dovish comments from the Fed, profits are coming in and there is lots of liquidity," said Joe Battipaglia, chief investment strategist at Ryan Beck & Co., in an interview with CNBC.com.
"The Fed is not as concerned about inflation and the improved language regarding the housing market reinforces stocks and is giving us a near-term lift."
Stocks followed through on a rally that started Wednesday when the Federal Reserve issued a statement following its latest meeting.
Buyers shrugged off weak manufacturing released midmorning though the market took a temporary dip.
"We had some more benign inflation data out this morning in the core PCE," James Maguire, floor broker at Christopher J. Forbes, told CNBC. "The focus is temporarily back on economic data. I think the focus will shift back to earnings next week."
Breadth was firmly positive with advancers leading decliners by more than two to one on the New York Stock Exchange.
Buyers flocked to industrial stocks as well as the energy sector, which was boosted by strong results from Exxon Mobil . The world's largest oil company posted the highest annual profit in U.S. history, pulling in a whopping $39.5 billion in 2006. But on a quarterly basis Exxon reported a drop in fourth-quarter profits from the year-ago period due to lower crude oil prices.
The sector also gained on solid fourth-quarter results reported by Valero Energy , which beat analysts' expectations.
Google reported fourth-quarter profits that nearly tripled, once again beating analysts' expectations. Shares were down more than 3%, with some analysts saying much of the good news is already priced into the stock. Google beat Wall Street expectations in nine of its 10 quarters as a publicly traded company.
Early investor enthusiasm faded for tech giant Dell, which said late Wednesday founder Michael Dell will return as CEO, faded steadily throughout the trading session after a number of Street analysts said it may be some time before Dell can turn things around. Shares of rival Hewlett-Packard also declined.
Archer-Daniels-Midland shares surged 10% after the company said fiscal second-quarter earnings rose 20% due to higher ethanol, starch and sweetener selling prices.
Shares of Equity Office Properties Trust rose after a group led by Vornado Realty Trust raised its its takeover offer for the largest U.S. office landlord. The new offer of $56 a share tops a rival bid of $54 from the Blackstone Group.
On the economic front, personal income rose 0.5% in December, while spending rose 0.7%. The core PCE price index, which is an important inflation gauge for the Fed, rose 0.1%. The data confirmed Wednesday's strong GDP report and provided further evidence of a strengthening economy.