Stocks rallied on Thursday on hopes of a strong earnings season after a solid profit from Alcoa Inc and a data suggesting stabilization in the labor market.

Major indexes rose about 1 percent, led by Alcoa Inc, up 2.3 percent at $14.53, a day after the Dow component posted its first profit after three consecutive quarterly losses on cost savings and higher aluminum prices.

The S&P materials index <.GSPM> gained 2.1 percent.

The upbeat tone was helped by monthly sales from major retailers, including Macy's Inc , suggesting the stagnant consumer spending could improve before the crucial holiday season.

All hands on deck for the earnings season. Nobody was expecting this quarter's numbers to be very good, so they had already been discounted. Alcoa's earnings announcement proves just that, said Keith Springer, president of Capital Financial Advisory Services in Sacramento, California.

The Dow Jones industrial average <.DJI> was up 90.91 points, or 0.94 percent, at 9,816.49. The Standard & Poor's 500 Index <.SPX> was up 11.35 points, or 1.07 percent, at 1,068.93. The Nasdaq Composite Index <.IXIC> was up 24.44 points, or 1.16 percent, at 2,134.77.

The number of U.S. workers filing new jobless claims slid to a nine-month low last week, according to a government report.

U.S. retailers posted their first monthly sales increase in more than a year, which suggested that recession-battered consumers might be regaining their ability and desire to spend again.

Store chains such as Macy's Inc rose 3.4 percent to $19.22 and Abercrombie & Fitch gained 7.1 percent to $34.98.

Kohl's Corp rose 2.2 percent to $59.81. The Standard & Poor's Retail Index <.RLX> added 2.2 percent.

On the Nasdaq, Microsoft's was one of the top performers, up 3 percent at $25.83.

Shares of natural resources companies also got a lift from the weak U.S. dollar, which propelled gold to a record of $1,058.20 an ounce.

U.S. crude oil futures prices shot up $1.95, or 2.8 percent, to $71.52 a barrel.

(Editing by Jan Paschal)

California