U.S. stocks jumped Thursday, with all three indexes closing sharply higher after jobless claims fell more than expected in the latest week, soothing worries the labor market was weakening too quickly.

All of the S&P 500 sectors rose, led by gains in S&P 500 technology and communication services.

Among the S&P 500's biggest gainers, shares of Eli Lilly surged after the drugmaker raised its annual profit forecast, and sales of its popular weight-loss drug Zepbound crossed $1 billion for the first time in a quarter.

Data showed the number of new applications last week for unemployment benefits fell more than expected.

"This was the data point for the week, so it took on added importance," said Paul Nolte, senior wealth advisor and market strategist for Murphy & Sylvest in Elmhurst, Illinois.

"Our reading on this is the labor market continues to be OK... The recession fears at this point are probably a little overblown."

Stocks had sold off sharply after last week's July U.S. jobs report sparked fears of a potential U.S. recession. Traders also cited an unwinding of positions of carry trades, where investors borrow money from economies with low interest rates to fund their bets in high-yielding assets elsewhere.

According to preliminary data, the S&P 500 gained 121.32 points, or 2.30%, to end at 5,320.82 points, while the Nasdaq Composite gained 464.22 points, or 2.87%, to 16,660.02. The Dow Jones Industrial Average rose 689.45 points, or 1.78%, to 39,452.90.

The Cboe Volatility index, Wall Street's fear gauge, was down on Thursday.

"Once volatility gets going, it takes a while for it to calm down," said David Lundgren, chief market strategist and portfolio manager at Little Harbor Advisors in Marblehead, Massachusetts.

"The fact that we're up a lot doesn't necessarily mean the lows are in or that we're going straight up from here," he said. "But looking out three months, six months the tendency to experience above-average returns is very high."

The second-quarter earnings season is winding down, but investors are watching final results closely after some disappointments earlier in the reporting period.

Under Armour surged after the sports apparel maker posted a surprise first-quarter profit, benefiting from its efforts to cut inventory and promotions.