A drop in unemployment claims and a rise in home sales pulled the stock market higher in light trading ahead of Thanksgiving.
Modest gains Wednesday left the Dow Jones industrial average and the Standard & Poor's 500 index at 13-month highs.
The economic news, as well as a drop in the dollar, stoked investors' appetite for higher-returning but riskier investments like stocks. For months, investors have been weighing their desire for bigger returns with fears that the stock market will falter if the economy looks like it won't maintain a recovery.
Investors drew confidence from a handful of promising economic reports. The government said new claims for unemployment insurance fell by 35,000 last week to 466,000. That's the fewest since September last year, and better than the 500,000 that economists had expected.
The drop in claims suggests the job market is healing, but concern remains that the improvement will be temporary. The jobless rate hit 10.2 percent in October and many analysts believe it will keep rising before starting to improve next summer.
In other economic reports, new home sales rose 6.2 percent to an annual rate of 430,000. That's above what economists surveyed by Thomson Reuters had expected.
The government also said consumer spending rose a brisk 0.7 percent last month, after falling in September. It was the best showing since August, when the government's now-defunct Cash for Clunkers programs enticed people to buy cars. The report was a welcome sign as the holiday shopping season goes into full swing.
Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, N.J., said investors are still worried about the sustainability of a recovery but are afraid of missing more of the market's eight-month rally.
"People may not believe in this market but they're reluctantly being pulled into it with each of these reports," he said.
The Dow Jones industrial average rose 30.69, or 0.3 percent, to 10,464.40, its second gain in three days and its best finish since October 2008.
The broader Standard & Poor's 500 index rose 4.98, or 0.5 percent, to 1,110.63, and the Nasdaq composite index rose 6.87, or 0.3 percent, to 2,176.05.
U.S. markets are closed for Thanksgiving and finishing early on Friday.
Major stock indicators are up more than 6 percent for November after a slowdown in October on worries that the market's advance had been too rapid. The quiet trading Wednesday followed a 133-point jump in the Dow on Monday as the dollar weakened. Tuesday brought a modest drop. Analysts say the market's gyrations signal that investors are lacking conviction about what's happening with the economy.
Haag Sherman, chief investment officer at Salient Partners in Houston, said light trading around Thanksgiving doesn't necessarily mean that investors have concluded that an recovery has taken hold. "The market's reaction has been in kind of a muted," he said.
The dollar fell against most other major currencies, while gold rose for the ninth straight day, advancing $21.20 to settle at $1,188.60 an ounce on the New York Mercantile Exchange. It touched a record $1,191.80 during trading.
When the dollar falls commodities become more affordable to buyers outside the U.S.
The drop in the dollar fanned the price of oil. Crude rose $1.94 to settle at $77.96 per barrel on the Nymex.
Bond prices were mixed. The benchmark 10-year Treasury note rose, pushing its yield down to 3.28 percent from 3.31 percent late Tuesday. The yield on the three-month T-bill was flat at 0.03 percent.
The Chicago Board Options Exchange's Volatility Index, known as the market's fear index, fell during trading to 20.05, its lowest level since August 2008. That's a signal that investors aren't as worried about big swings in the market.
Beyond the increase in consumer spending, earnings from Tiffany & Co. boosted confidence about how much consumers might spend for the holidays. The jeweler's third-quarter profit topped expectations and the company raised its full-year profit forecast. Tiffany rose $2.06, or 4.9 percent, to $43.89.
The reports came ahead of the unofficial start of the holiday shopping season on Friday. Investors will be looking for any signals in the coming weeks from retailers about consumer spending, the primary driver of the economy.
Two stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 3.1 billion, the lowest level of 2009. Volume was 3.8 billion Tuesday.
Overseas, Japan's Nikkei stock average rose 0.4 percent. Britain's FTSE 100 rose 0.8 percent, Germany's DAX index rose 0.6 percent, and France's CAC-40 rose 0.7 percent.
Augstums reported from Charlotte, N.C.