U.S. stocks gain on improving U.S. jobs, factory data; Dow rises 0.83%

U.S. stocks rose on Thursday after weekly jobless claims came in less than expected while a key manufacturing barometer beat market forecasts.

At the close of U.S. trading, the Dow Jones Industrial Average finished up 0.83%, the S&P 500 index rose 1.25%, while the Nasdaq Composite index rose 1.36%.

In the U.S. earlier, the Institute for Supply Management said its widely-watched purchasing managers index rose to 55.4 in July from 50.9 in June, expanding at its fastest rate since April 2011 and well above market forecasts for a 52.0 reading. 

Elsewhere, the Department of Labor said the number of individuals filing for initial jobless benefits in the week ending July 26 fell by 19,000 to 326,000. 

Analysts were expecting jobless claims to come in at 345,000. 

Stocks rallied on the data, which pointed to a U.S. economy that may be speeding up its recovery from the 2008 financial crisis and years of sluggish growth afterwards.

The data fueled expectations that the Federal Reserve may wind down stimulus measures in the near future, which are bullish for stocks by design, though any decision to do so should herald the arrival of better days for the U.S. economy, which would also be bullish for stocks.

Leading Dow Jones Industrial Average performers included American Express, up 2.48%, Bank of America, up 2.33%, and Hewlett-Packard, up 2.18%.

The Dow Jones Industrial Average's worst performers included Exxon, down 1.13%, Intel, down 0.60%, and Microsoft, down 0.53%.

European indices, meanwhile, finished higher.

After the close of European trade, the EURO STOXX 50 rose 1.26%, France's CAC 40 rose 1.25%, while Germany's DAX 30 finished up 1.63%. Meanwhile, in the U.K. the FTSE 100 finished up 0.92%.

On Friday, the Bureau of Labor Statistics will release its July jobs report, a major indicator of U.S. recovery.