Investors are getting enthusiastic about stocks again after some reassuring news from the job market.

Stocks rose for a third straight day Thursday on the Labor Department's report of a larger than expected drop in the number of newly laid-off people seeking unemployment benefits. The Dow Jones industrial average rose 121 points after climbing 275 Wednesday and advancing modestly Tuesday. The 4.7 percent gain in that time is the Dow's best three-day move since mid-May.

Employment news has been the key driver behind the market's moves during the past few weeks. Thursday's news was a welcome change from a string of disappointing jobs reports, including the government's June employment numbers, that have pounded stocks recently.

The Labor Department said initial claims for jobless benefits dropped last week to their lowest levels since early May. Claims fell to 454,000, better than the 465,000 forecast by economists polled by Thomson Reuters.

High unemployment has hurt consumer confidence, which in turn has slowed spending. And because consumers account for about 70 percent of U.S. economic activity, the recovery is unlikely to gain much momentum unless consumers are working and feeling more secure about spending.

Retailers had mixed news about consumer spending. Several big retailers including those that cater to teenagers reported lackluster June sales. Others including department store operators Macy's Inc. and JCPenney Co., saw a pickup in business. Overall, merchants said shoppers again spent cautiously, and analysts said stores were discounting heavily in order to bring customers in.

Hank Smith, chief investment officer of equity at Haverford Investments, said some investors have been worried about a so-called "double-dip" in the economy but that more recent data, including Thursday's jobs report, are a reminder that the recovery is continuing.

"It's hard to see rolling into a double dip," he said.

Stocks got some support from a global economic forecast from the International Monetary Fund. The IMF raised its world growth estimate for the year to 4.6 percent from 4.2 percent. The stock market's losses since the major indexes reached 2010 highs in late April have been largely due to fears that debt problems in European countries might hurt the recovery around the world.

The market's advance accelerated in the final hour. Many traders, seeing stocks hold their gains, wanted to be sure they didn't miss out on the rally, so they began buying before the closing bell.

The Dow rose 120.71, or 1.2 percent, to 10,138.99. The Standard & Poor's 500 index rose 9.98, or 0.9 percent, to 1,070.25, while the Nasdaq composite index rose 15.93, or 0.7 percent, to 2,175.40.

The Dow jumped back above 10,000 Wednesday. Traders say the recent gains, which came after seven straight days of declines, were not tied to any one particular catalyst. Instead some investors went back into the market thinking prices had been beaten down too much in the past couple of weeks. But trading volume has been light this week. That's a sign that few investors are driving the advance. And that means the gains could quickly unravel if more disappointing economic news arrives.

"The question is, does this continue and does this bring in buyers?" said Quincy Krosby, chief market strategist at Prudential Financial. She said some traders believe the market's advance has been driven by program trades, which occur when traders use computers to buy and sell stocks at certain levels. That would mean stocks are rising because of the market's own internal dynamics, not renewed confidence.

Krosby said earnings reports from the April-June quarter, which start to arrive next week, will help determine whether longer-term buyers step in. Investors are expected to be most interested in companies' forecasts for the coming quarters.

"This market is not worried about the last three months, it's worried about the next three to six months," Krosby said.

Interest rates were mixed in the Treasury market as investors sold bonds following the jobs report.

The yield on the 10-year Treasury note, which moves opposite its price, rose to 3.04 percent from 2.99 percent late Wednesday. The yield fell below 3 percent last week for the first time since April 2009 as investors grew nervous about the economy. The yield on 10-year Treasurys helps determine the interest rate on some mortgages and other consumer loans.

The higher forecast from the IMF helped boost overseas markets and the euro. The 16-nation currency climbed to $1.2698, its highest level since May.

Among retailers, American Eagle Outfitters Inc. fell 46 cents, or 3.8 percent, to $11.80 after its June sales disappointed traders. Abercrombie & Fitch rose $2.55, or 7.8 percent, to $35.45 after its sales at stores open at least a year rose 9 percent. Gap Inc. said sales at stores open at least one year were unchanged in June, less than analysts expected. The stock fell $1.50, or 7.6 percent, to $18.22.

Macy's rose 53 cents, or 3 percent, to $18.44. Penney was up $1.46, or 6.7 percent, at $23.24.

Four stocks rose for every one that fell on the New York Stock Exchange, where consolidated volume came to 4.6 billion shares, compared with 5.1 billion Wednesday.

The Russell 2000 index of smaller companies rose 8.61, or 1.4 percent, to 620.27.

Britain's FTSE 100 rose 1.8 percent, Germany's DAX index rose 0.7 percent, and France's CAC-40 gained 1.6 percent. Japan's Nikkei stock average jumped 2.8 percent.