U.S. stocks closed sharply higher on Thursday, as Wall Street digested the European Central Bank's rates decision, economic data and a fresh batch of earnings.
"We were hoping the ECB would remain open to further easing, and it appears as though they are," said Art Hogan, chief market strategist at Wunderlich Securities.
The ECB kept interest rates unchanged.
"Short-term inflation expectations have declined but more medium- to long-term inflation expectations, after some decline following our last meeting have now recovered and are basically unchanged since then," ECB President Mario Draghi said in a news conference.
Draghi's remarks pushed the euro down about 2 percent against the dollar.
"Obviously, Europe needs to devalue its currency a bit more," said Randy Frederick, managing director of trading and derivatives at Charles Schwab. "The concern of the euro gaining value is [weighing], so I think Mario Draghi is sort of trying to push that in the other direction."
Frederick also said he expects the ECB to go further into its quantitative easing program — which began in March — before the year ends.
The Dow Jones industrial average rose more than 330 points at its highs, extending on its opening gains. The blue chips index also recorded its best day since Sept. 8.
The S&P 500 and the Nasdaq Composite gained more than 1.5 percent after opening sharply higher. The Nasdaq closed above 4,900 for the first time since August 19.
"From a technical perspective, there are these trading ranges that were the first four or five months of the year," said Mark Luschini, chief investment strategist at Janney Montgomery Scott. "We could face resistance at the 2,60 level [of the S&P]."
Draghi's comments also sent European equities higher, with the German DAX and the French CAC 40 both closing above 2 percent.
"I think the markets are telling you the correction is over," said Maris Ogg, president at Tower Bridge Advisors. "If you look at these mediocre earnings, the market is taking them in stride."
"So far, earnings this morning have been mixed ... but we have a lot of big names to get through, still," said Peter Cardillo, chief market economist at Rockwell Global Capital.
McDonald's posted earnings per share and revenue that beat expectations, sending the stock up 9.12 percent to $110.87, accounting for about 53.49 points of the Dow's gains. The stock also posted its best trading day since October 2008.
3M reported mixed earnings, while Caterpillar missed on both lines.
On the data front, investors digested weekly jobless claims and the Chicago Fed National Activity index.
"The jobless claims number was phenomenal," Frederick said.
Weekly jobless claims came in at 259,000, below the expected 265,000. The September Chicago Fed national activity index came in at -0.37, slightly higher than the -0.39 August reading.
The FHFA House Price index rose 0.3 percent in August.
Other economic data points included September existing home sales, which rose 4.7 percent to 5.55 million.
"That's good news," Hogan said. "We're just starting to recover from the financial crisis and housing is a very important part of the U.S. economy."
Leading indicators also fell 0.2 percent.
"What this shows me is further loss of momentum in the U.S. economy," said Marie Schofield, chief economist and senior portfolio management at Columbia Threadneedle Investments. She also said it is likely that the Federal Reserve will hold off on raising rates until next year.
"The Federal Reserve has given us its playbook; this is not Alan Greenspan's Fed," said Jeff Powell, managing partner and CIO of Polaris Greystone Financial Group. "Rates will go up [eventually], but it will be predictable."
Investors also kept an eye on oil prices, as U.S. crude were on pace to shed over 3 percent for the week.
"Any kind of balance in WTI holding around $45 per barrel will be positive," Hogan said.
U.S. oil closed up 18 cents, or 0.4 percent, at $45.38 a barrel.
Powell said that, while it is uncertain oil has found a bottom, it is likely to remain near current levels is the Organization of Petroleum Exporting Countries keeps its current production levels.
Overnight, Asian stock markets closed mixed, as the Shanghai Composite rose 1.47 percent, while the Nikkei 225 fell 0.64 percent.
In corporate news, CIT Group said CEO John Thain will retire in March, and will be replaced by Ellen Alemany, a long-time banking executive.
Lululemon Chief Product Officer Tara Poseley is leaving the company after two years.
The closed 33.57 points higher, or 1.66 percent, at 2,052.51, with industrials leading nine sectors higher and health care lagging.
The Nasdaq closed up 79.93 points, or 1.65 percent, at 4,920.05.
The CBOE Volatility Index (VIX) widely considered the best gauge of fear in the market, traded near 15.
U.S. 10-year yields traded at about 2.02 percent, while two-year yields fell to 0.58 percent.
Advancers led decliners 3 to 1 at the New York Stock Exchange, with an exchange volume of 1.041 billion and a composite volume of 4.372 billion at the close.
Gold futures settled down $1 at $1,166.10 an ounce.
On tap this week:
9:45 a.m.: Manufacturing PMI
More From CNBC.com:
- China will call crude oil's next move: Traders
- Cramer: Scariest decline I've seen in 35 years
- Fresh & Easy begins closing down stores
— CNBC's Peter Schacknow and Reuters contributed to this report.
Correction: This story has been updated to reflect that Marie Schofield's firm is Columbia Threadneedle Investments.