Technology issues pushed stocks higher, as investors continued to buy even amid fresh signals that the economy still has a ways to go before recovering.
The Nasdaq tech gauge gained more than 1 percent, but the other major averages eased off their earlier gains, with most major bank shares turning negative as Citigroup led 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.
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 GDP fell more than expected to reflect a negative 6.3 percent growth rate.
In corporate news, 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.
Sen. Carl Levin, D-Mich. said that "it is clear" more help is on the way and any assistance for General Motors and Chrysler would be tied to new conditions on restructuring.
GM shares surged on the developments and the company led gainers on the Dow 30..
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.
Treasury Secretary Tim Geithner will unveil a four-part plan to reform financial regulation when he testifies before the House Financial Services Committee Thursday.
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.
Despite the modest early gains market breadth was broadly positive, with gainers beating losers 2 to 1 as about 300 million shares changed hands on the New York Stock Exchange. There were six new highs and no new lows.