The S&P 500 gained 0.56 percent to close at 1,480.94, its highest level since December 2007. The Dow Jones industrial average also rose, climbing to a five-year high during the day, before falling back to finish 84.79 points higher at 13,596.02. The Nasdaq composite climbed 0.59 percent to 3,136.
U.S. builders started work on homes in December at the fastest pace since the summer of 2008, the Commerce Department said Thursday. Homebuilder stocks rose broadly following the report. The S&P 500's homebuilding index climbed 3.8 percent, its biggest gain in almost a month.
Kim Caughey Forrest, a senior analyst at Fort Pitt Capital Group, said it was too early to conclude that the housing market had turned the corner. "This rally is probably a little bit too optimistic for the information that we got," she said.
The number of Americans seeking unemployment benefits fell to a five-year low last week, the Labor Department reported, a sign that the job market is healing. Weekly unemployment benefit applications fell 37,000 to 335,000, a bigger decline than economists had forecast, according to financial data provider FactSet.