A slew of upbeat data on the American economic recovery supported Wall Street, underpinning expectations corporate profits will improve accordingly.
Reports on labour, manufacturing and housing in the US bolstered optimism that the world's largest economy remained in good shape to further sustain its momentum.
"We're getting this incredible flow of good data," Jim Paulsen, chief investment officer at Wells Capital Management in Minneapolis, told Reuters. "It's hard not to want to step into the market."
In early afternoon trading in New York, the Standard & Poor's 500 Index gained 1.01 per cent, the Nasdaq Composite Index advanced 1.31 percent and the Dow Jones Industrial Average rose 0.94 per cent.
Labor Department data showed an unexpected drop in initial claims for state unemployment to the lowest level since March 2008 last week.
The Philadelphia Federal Reserve Bank said its business activity index rose to 10.2 this month from 7.3 in January as orders and shipments rose. And the Commerce Department said housing starts rose 1.5 percent to an annual rate of 699,000 units last month, surpassing expectations.
"The numbers add to the belief that the economy is shifting gears. There is just no number that is giving us a whole lot of trouble, except for consumer spending," Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania, told Reuters.
In Europe, the FTSEurofirst 300 index of top European shares closed with a 0.1 percent gain for the day.
Greece still needs to secure its second bailout, which it hopes will happen at an EU finance ministers meeting on Monday.
The euro rose on reports the European Central Bank is ready to exchange Greek bonds for new securities. The euro strengthened 0.3 percent to US$1.3111 by about midday in New York after earlier dropping to US$1.2974.
European governments are considering cutting interest rates on emergency loans to Greece and using contributions from Europe's central bank to plug a new financing gap in the second bailout program for Athens, Bloomberg News reported, citing two people familiar with the discussions.
Meanwhile, Moody's warned, in two separate statements released on Wednesday and Thursday, that it might downgrade the credit ratings of 17 global and 114 European financial institutions because of challenging conditions including the impact of Europe's sovereign debt crisis.
Moody's might cut the long-term credit rating of UBS, Credit Suisse and Morgan Stanley by as much as three notches following the review, according to Reuters. Among the banks that might be downgraded by two notches are Barclays, BNP Paribas, Credit Agricole, Deutsche Bank, HSBC Holdings, and Goldman Sachs.
Bank of America and Nomura were included in those that might be downgraded by one notch.