Investors seemed to be in a wait-and-see mode ahead of next week's key inflation data and the Federal Reserve's policy meeting.
The Dow Jones Industrial Average rose 168.59 points, or 0.50 percent, to 33,833.61. The S&P 500 added 26.41 points, or 0.62 percent, to 4,293.93. The Nasdaq Composite Index increased 133.63 points, or 1.02 percent, to 13,238.52.
Seven of the 11 primary S&P 500 sectors ended in green, with consumer discretionary and technology leading the gainers by rising 1.56 percent and 1.20 percent, respectively. Meanwhile, real estate and energy led the laggards by losing 0.62 percent and 0.44 percent, respectively.
Technology shares drove a rally in U.S. stocks on Thursday, with the tech-heavy Nasdaq bouncing back. Amazon propelled tech shares higher after a bullish analyst call. The e-commerce giant's shares rose 2.5 percent and helped the related exchange-traded funds (ETFs) advance sharply. Tesla and Nvidia also rose more than 2.5 percent respectively.
Meanwhile, investors are reassessing the trajectory of the Federal Reserve's monetary policy after central banks in Canada and Australia unexpectedly raised interest rates this week. Some analysts are anticipating a 25-basis-point hike at the Fed's meeting on June 14, which would bring the federal funds rate up to a range of 5.25 percent to 5.5 percent.
"The balance of the data still points to another hike," said Andrew Hollenhorst, chief U.S. economist at Citi, in an interview with MarketWatch, adding that this forecast was a "close call."
The new job data, however, tempered some concerns about the impact on the stock market if the Federal Reserve keeps its benchmark rate higher for longer, and triggered market expectations that the Fed might not increase interest rates next week.
The U.S. Labor Department reported Thursday that U.S. initial jobless claims rose by 28,000 to 261,000 in the week ending June 3, the biggest increase since July 2021 and exceeding economists' forecast, suggesting a sign of a pickup in layoffs and a potentially softening labor market.
Jobless claims spiked last week in what could be the start of another trend higher after stabilizing over the last few months. Claims had been expected to rise much earlier than this but for one reason or another, they've stayed remarkably steady, said Craig Erlam, senior market analyst at OANDA, a supplier of online multi-asset trading services.
"It's also worth noting that this is only one release so unless it's backed up by more of the same, we can't read much into it. But the timing ahead of next week's Fed meeting is interesting as it may add just a tad more comfort to policymakers leaning towards holding rates steady," said Erlam.
A critical question is whether the Fed will have to generate a recession to bring inflation back to its target of 2 percent. The key issue to watch is whether the labor market is able to rebalance smoothly, according to an article published by Goldman Sachs Research on Thursday.
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