U.S. stock indexes climbed in a broad-based rally on Thursday after upbeat annual forecasts from several retailers, while data confirmed the U.S. economy contracted in the first quarter, easing concerns about aggressive interest rate hikes.

All of the 11 major S&P sectors advanced, with consumer discretionary up 4.1%, followed by a 1.9% rise in the financials sector.

The small-cap Russell 200 index added 2.1%.

Macy's Inc surged 16.2% after the department store raised its annual profit forecast, as party-wear demand rebounds.

Dollar General Corp and Dollar Tree gained 11.7% and 18.4% respectively, after lifting their annual sales forecasts, as more Americans turn to discount store shopping with inflation at a four-decade high.

Meanwhile, the Commerce Department's report showed U.S. GDP fell at a 1.5% annualized rate last quarter amid a record trade deficit and a sequential decline in the pace of inventory accumulation. The economy grew at a robust 6.9% in the fourth quarter.

Separately, weekly jobless claims fell to 210,000 last week, consistent with a tight labor market despite rising interest rates and tightening financial conditions.

"For a market that looks forward, the thought is that we're near a bottom in terms of the type of news we're getting and maybe prices have already discounted the slowdown that we're seeing," said Rick Meckler, partner at Cherry Lane Investments in New Vernon, New Jersey.

"The data is raising hopes of a potential dovish pivot later this year."

The reports came a day after the minutes of the Federal Reserve's May meeting showed most policymakers backed rate hikes of 50 basis points in June and July to tame inflation, but appeared flexible to possibly change course in September.

Markets have sold off sharply this year on growing worries about an economic slowdown due to aggressive Fed policy moves aimed at reining in surging prices. The war in Ukraine, pandemic-related lockdowns in China and recent dismal earnings forecasts have also weighed down markets.

The blue-chip Dow and the benchmark S&P 500 have lost 10.3% and 15.1% year-to-date, while the tech-heavy Nasdaq has fallen 25.4% as high-multiple growth stocks took a hit from rising interest rates.

Still, the S&P 500 and the Nasdaq appear set to snap their 7-week losing streak, the longest since the dotcom bust in 2001, with the benchmark indexes up 3.7% so far this week.

The CBOE volatility index hit its lowest level since May 18 at 27.61 points.

"The reality is a lot more complicated at this juncture and so we will have these counter trend rallies in any bear market environment," said Hans Olsen, chief investment officer of Fiduciary Trust Company.

At 11:37 a.m. ET, the Dow Jones Industrial Average was up 479.02 points, or 1.49%, at 32,599.30, the S&P 500 had advanced 66.23 points, or 1.66%, to 4,044.96, and the Nasdaq Composite was up 232.38 points, or 2.03%, at 11,667.12.

Advancing issues outnumbered decliners by a 7.29-to-1 ratio on the NYSE and by a 3.50-to-1 ratio on the Nasdaq.

The S&P index recorded three new 52-week highs and 29 new lows, while the Nasdaq saw 21 new highs and 79 new lows.