Investors in both the United States and in Europe will be closely watching events from Frankfurt on Thursday.
The day's trading session could take its cue from the European Central Bank's Governing Council meeting on monetary policy, which ECB President Mario Draghi is set to wrap up with a news conference at 8:30 a.m., ET.
"It's going to be a bit of a communication challenge for Draghi tomorrow. It's going to depend on how well he communicates in the Q&A session tomorrow," said Patrick O'Donnell, investment manager at Aberdeen Asset Management.
"It's going to be pretty tricky I think, because of the growing consensus in the Governing Council that the current policy is doing more harm than good," he said.
Europe's central bank has an 80 billion euros-a-month ($86.06 billion) asset purchase, or quantitative easing, program that is set to end in March. Markets generally expect policymakers to keep policy easy by extending the program by six months.
However, the ECB could disappoint markets if the program isn't extended that long, or if the bank cuts monthly purchases to 60 billion or another level. Hints of such a reduction, also known as tapering, first made its way into markets in early October but Draghi said at a meeting later that month that there had been "no discussion" of when to wind down asset purchases.
At a time when U.S. interest rates are largely expected to rise over the coming year, markets will be especially watching for guidance on where European rates are headed.
"If there's any hint the ECB isn't fully committed to the current QE program, bond markets would sell off and the spread would widen," O'Donnell said. He added that the euro would likely also strengthen and the situation would be "bad for stock markets in general."
The ECB meeting comes after a relief rally in European stocks despite Italians voting against constitutional reform in a Sunday referendum. Matteo Renzi resigned from his position as prime minister Wednesday.
The euro surprisingly strengthened against the U.S. dollar after the initial referendum result, holding near $1.076 in late trade Wednesday.
The STOXX Europe 600 Bank index is up more than 7.5 percent for the week, tracking for its best since April this year, as reports surfaced that Italy is planning to support the country's struggling Monte dei Paschi bank.
The gains in European stocks has helped support U.S. stocks, some analysts said.
"I think people were relieved for a little bit the bank situation in Europe was plugged up a bit," said Ilya Feygin, managing director and senior strategist at WallachBeth Capital.
He had his doubts about full resolution to Europe's banking sector woes, but said the relief that "Europe didn't blow up" tells many investors they "need to get invested."
The and Dow Jones industrial average surged to close at records, rising more than 1 percent in their best day since Nov. 7. The Dow transports also closed at a record after hitting a fresh all-time high for the first time since November 2014.
The Nasdaq composite jumped more than 1 percent but failed to make a new high, closing within 0.2 percent of its all-time intraday high.
Traders said there was no specific reason for the gains. They pointed to a combination of factors including end-of-year institutional buying, short covering, breaking above technical resistance and continued optimism on growth from U.S. President-elect Donald Trump's promises of tax cuts and infrastructure spending.
"It's one gigantic Trump-inspired performance chase right now," said Peter Boockvar, chief market analyst at The Lindsey Group.
The S&P 500 closed up 29.12 points at 2,241.35, with telecoms leading all sectors higher except health care, which fell on the Trump comment, "I'm going to bring down drug prices."
The iShares Nasdaq Biotechnology ETF (IBB) fell 2.9 percent in its worst day since Oct. 11.
Oil also settled lower, down more than 2 percent to settle at $49.77 a barrel on renewed concerns about oversupply.
Treasury yields were slightly lower on the day, with the 2-year yield near 1.10 percent and the 10-year yield around 2.35 percent.
"Bonds are consolidating a recent sell-off," Boockvar said. "If [the 10-year Treasury] yields renew their recent rise, 2.5, 2.75, people have to wonder what that means for stocks."
In addition to the ECB's morning interest rate decision and press conference, weekly U.S. jobless claims are due before the open Thursday. Natural gas inventories and the Fed balance sheet are scheduled for release later in the day.
Sears Holdings, Ciena and Acushnet are set to post quarterly results before the open, while Broadcom, Duluth, Restoration Hardware, Finisar and Cooper Cos. are scheduled to report earnings after the close.
— Reuters contributed to this report.