U.S. stocks were up solidly on Thursday as investors were convinced the latest batch of economic data and falling oil prices could be strong catalysts to move the market higher.

Investors shifted focus from oil to the improvements shown in recent economic data a day before the February U.S. employment report.

The whisper number among traders is that the non-farm payrolls will rise by over 200,000, compared to a median estimate of 185,000 by economists polled by Reuters.

Industrial stocks led the market higher, boosted by a weaker dollar and an improving outlook for global demand. The S&P industrial index <.GSPI> gained 2.4 percent, with Caterpillar Inc up 3.2 percent to $104.25.

The package of data from this week points to a stronger-than-consensus estimate for tomorrow, said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey, referring to a rise in non-farm payrolls.

She added if payrolls do rise more than expected, stocks would resume their uptrend that had been interrupted due to geopolitical concerns.

The Dow Jones industrial average <.DJI> was up 200.18 points, or 1.66 percent, at 12,266.98. The Standard & Poor's 500 Index <.SPX> was up 21.73 points, or 1.66 percent, at 1,330.17. The Nasdaq Composite Index <.IXIC> was up 51.24 points, or 1.86 percent, at 2,799.31.

Stocks have shown resilience in the face of economic headwinds. The broad S&P 500 is down only about 1 percent from a peak in late February after falling around 3 percent due to growing violence in oil-producer Libya.

However, volume continues to be below average on days when the market rallies, which has caused some traders to be skeptical about the durability of the rally.

We're up a ton, but the feeling is apathetic, said Ken Polcari, managing director at ICAP Equities, a New York Stock Exchange floor broker.

The Arab League said a peace plan for Libya was under consideration. The plan put forth by Venezuelan President Hugo Chavez, if successful, could end a major headwind for equities.

Oil prices retreated from near 2-1/2 year highs. Brent crude futures for April delivery were down $2.02 at $114.33 a barrel, after ending at $116.35 on Wednesday, the highest close since August 2008.

Initial jobless claims fell last week to 368,000 -- a 2-1/2 year low -- one day after a robust report on private-sector hiring.

In other economic news, the Institute for Supply Management's non-manufacturing index rose to 59.7 in February, slightly above forecasts and higher than the January result.

Several top U.S. retailers posted bigger-than-expected sales gains for February. The S&P retail index <.RLX> rose 1.1 percent.

(Reporting by Angela Moon, Editing by Kenneth Barry)

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