The Dow closed up 136.16 points, or 1 percent, at 13,232.62. It was the best day for the Dow since Sept. 13.
The Standard & Poor's 500 index rose 15.43 points, or 1.1 percent, to 1,427.59. The Nasdaq composite index added 42.83, or 1.4 percent, to 3,020.06.
All three indexes fell in October, their first monthly losses since May.
The surge came after the Institute for Supply Management said factories are seeing more new orders and increased production, and the Conference Board said Americans' confidence in the economy had surged to the highest level in nearly five years.
Traders watch manufacturing and consumer confidence because factories and consumers are crucial players in the economic recovery. Manufacturing lifted America out of recession, and the resurgent car industry has supported the economy during recent periods of weakness. Consumers, meanwhile, account for about 70 percent of economic activity. If they're not happy enough to spend, no one else has the buying power to take up the slack.
Also setting the tone Thursday was anticipation of the Labor Department's October jobs report, which is due out on Friday. Before trading began, the government said new applications for unemployment benefits fell 9,000 last week to a seasonally adjusted 363,000, a level consistent with modest hiring. Separately, payroll provider ADP said businesses added 158,000 jobs in October.
It was the second day of trading after Superstorm Sandy ravaged New York and forced markets to close on Monday and Tuesday. Companies that had postponed earnings announcements rushed to release their results.
Thursday's upswing started with strong sales results from retailers and automakers. Chrysler had its best October in five years, with sales rising 10 percent, despite the disruption caused by the storm.
Exxon Mobil beat the financial expectations of analysts surveyed by FactSet, but reported lower production of oil and gas. Its stock rose 43 cents to $91.60.
Kellogg Co.'s net income edged up in the third quarter, as its acquisition of Pringles chips earlier this year paid off. Kellogg leapt $1.18, or 2.3 percent, to $53.50.
Pfizer said its third-quarter profit fell 14 percent on plunging sales, mainly due to new competition from generic forms of Lipitor, long the world's top-selling drug. Pfizer fell 32 cents to $24.55.