By Josie Cox and Saumya Vaishampayan
U.S. stocks rose sharply Thursday after stronger-than-expected U.S. growth figures and a rally in Asia and Europe.
The Dow Jones Industrial Average was recently 276 points, or 1.7%, higher at 16562, while the S&P 500 and the Nasdaq Composite were both up 1.9%.
Gross domestic product, the broadest measure of goods and services produced across the country, expanded at a 3.7% seasonally adjusted annual rate in the second quarter, the Commerce Department said Thursday, up from an initial estimate of 2.3% growth. Economists surveyed by The Wall Street Journal had forecast a 3.3% rate.
The report showed upward revisions to consumer spending and business investment, which analysts pointed out as encouraging.
"It's a very solid report," said Quincy Krosby, market strategist at Prudential Financial. "You ultimately have to have growth and demand in order to see the stock market move higher," she added.
Separately, initial jobless claims fell by 6,000 to a seasonally adjusted 271,000 in the week ended Aug. 22, the Labor Department said, suggesting the labor market remains healthy. Economists surveyed by The Wall Street Journal had expected 273,000 claims.
The report underscores the relative firmness of the U.S. economy and gives the Federal Reserve leeway to raise interest rates as soon as this year, despite the economic uncertainty in China that has buffeted U.S. stocks as of late, said Doug Cote, chief investment strategist at Voya Investment Management.
"The U.S. economy is still shining," he said. "There is zero inflation across the globe, so the Fed has cover not to raise rates, but the economy is surging so I'm at 50-50 right now for September," he added.
U.S. stocks snapped a six-day losing streak Wednesday and on Thursday the rally spread into Europe and Asia.
The pan-European Stoxx Europe 600 closed 3.5% higher. The Shanghai Composite Index led Asian markets higher, closing up 5.3% after five consecutive days of losses.
"It certainly looks calmer, but it's hard to know how sustainable these moves are," said Patrik Schöwitz, a global multiasset strategist at J.P. Morgan Asset Management, which has about $1.8 trillion under management globally.
"It's definitely too early to say that the latest bout of volatility is over," he said.
Strategists at Rabobank said in a note to clients that markets were in a "fragile equilibrium."
The rally in the U.S. was helped Wednesday by Federal Reserve Bank of New York President William Dudley saying the case for a September rate increase has grown "less compelling" given the turmoil in markets around the world, reassuring investors who may have been concerned that higher rates would put additional strain on markets at a volatile time.
Ultralow interest rates since the global financial crisis have sent stocks sharply higher.
"Markets have for days been looking for some sort of positive cue," said Paul Markham, an equity investor at asset manager Newton, which has $75.9 billion under management.
He said that cue had in part come from Mr. Dudley's comments, but "it remains to be seen how long that shot in the arm will last."
Investors will be watching for more clues from policy makers later Thursday when a conference of central bankers from around the world begins in Jackson Hole, Wyo.
However, anyone hoping the event will shed more light on the likely path and timing of a U.S. rate rise could be disappointed, said Luke Bartholomew, a fixed income investor at Aberdeen Asset Management, which has about $483 billion under management.
"The Fed really doesn't want to pin itself down to any particular date in the future because it needs to keep an eye on the economic data coming in and movements in financial markets," he said.
In currency markets, the U.S. dollar firmed against the euro and the yen following the stronger U.S. growth data.
The euro was recently down 0.9% against the buck at $1.1240. The dollar was up 0.5% against Japan's yen at around Yen120.71.
Brent crude rose 6.9% to $46.11 a barrel.
U.S. 10-year Treasury yields were at 2.189%, marginally higher on the day. Yields fall as bond prices rise.
--Dan Strumpf contributed to this article
Write to Josie Cox at josie.cox@wsj.com and Saumya Vaishampayan at saumya.vaishampayan@wsj.com
