Wall Street returns to 2008 highs on banks

US stocks rose on Thursday, moving back to 2008 highs, after a jump in bank shares and further upbeat data on the labor market, though sharp gains in oil prices limited the advance.

After losses on Wednesday, the rebound took the S&P 500 back above its 1,370 resistance level, which is seen as key to maintaining momentum in this five-month rally.

Bank shares ranked among the best performers on hopes that the European Central Bank's second long-term liquidity injection would ease the region's financial crisis. The S&P financial sector gained 1.2%, led by a 2.9% gain in JPMorgan Chase & Co to $40.37.

The ECB news "is going to be immediately positive for the banking system and for the credit markets in Europe, and in time, will be positive for the European economy. They are on the right road, which means that the risks associated with Europe are starting to abate. And that's really good news," said Hugh Johnson, chief investment officer of Hugh Johnson Advisors LLC in Albany, New York.

An index of European shares rose 1.1%.

Brent crude's advance, which took futures above $128 a barrel to the highest since 2008 in post-settlement trading, revived concerns about the effect of higher oil prices on consumers and businesses.

Still, the Dow Jones Transportation Average ended up 1.1%, suggesting investors were shrugging off the day's rise in oil.

US jobless claims, which fell 2,000 to 351,000 in the latest week, were viewed as another sign the labour market may be on the mend. The news was partly offset by an Institute for Supply Management report showing the pace of growth in the US manufacturing sector unexpectedly slowed in February.

The Dow Jones industrial average was up 28.23 points, or 0.22%, at 12,980.30. The Standard & Poor's 500 Index was up 8.41 points, or 0.62%, at 1,374.09. The Nasdaq Composite Index was up 22.08 points, or 0.74%, at 2,988.97.

Automakers and retailers also were among the day's best advancers.

US automakers reported surprisingly healthy sales in the face of rising gas prices. Shares of Ford Motor rose 2.3% to $12.66, while General Motors advanced 1.7% to $26.47.

Mild weather helped many US chains post better-than-expected monthly sales in February. Gap jumped 7.2% to $25.05 while Buckle gained 6.9% to $48.01.

The S&P retail index gained 0.8%.

The late-day surge in oil prices followed an Iranian media report of an explosion on an unknown Saudi oil pipeline, but a CNBC report cited a Saudi oil official as saying the report was untrue. Brent crude rose $3.54 to settle at $126.20 a barrel.

Stocks have held up, however, with the S&P 500 now up 9.3% since the end of December.

Brokerage UBS raised its year-end target on the S&P 500 citing improved US economic data, and said the market is likely to continue its upward path over the rest of 2012. Its target is now 1,475, compared with 1,325 previously.

Volume was about 7 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, in line with the daily average of 7 billion.

The ratio of advancing stocks to declining stocks was about 2 to 1 on the NYSE, while on the Nasdaq, seven stocks rose for about every five that fell.