NEW YORK (CNN/Money) - U.S. stocks rallied to close higher for the second straight day Wednesday, after four days of losses, as investors fixated on the possibility that the end of the war in Iraq could be closer than they thought.

The Dow Jones industrial average (up 215.20 to 8285.06, Charts) rose 2.7 percent, while the S&P 500 index (up 22.42 to 880.90, Charts) racked up a gain of 2.6 percent. But the biggest gainer was the Nasdaq composite (up 48.42 to 1396.72, Charts), which jumped 3.6 percent and closed just below the 1,400 mark.

"Today is a classic broad-based rally. You not only have techs rising, but you have financials, big-cap pharma, retail," said Tim Heekin, head of stock trading at Thomas Weisel Partners. "There doesn't appear to be a real rational explanation, except that it seems institutions are expecting a second-half recovery. The Baghdad news could be part of it."

U.S. markets had seen four consecutive days of declines on worries that the war could prove longer than expected due to strong resistance from Iraqi forces and tough sandstorms. The streak broke Tuesday, and reports that troops had cut their distance to the capital city to 15 miles had investors cheering Wednesday.

A quick resolution to the war would allow Wall Street to shift its focus back to things like the U.S. economy and corporate profit growth, neither of which is in great shape. Speculation in the market is that once the war is over, businesses and consumers will loosen their purse strings -- allowing for a return of growth to the currently crippled economy.

Such hopes and a bit of feel-good attitude after the overnight rescue of a U.S. prisoner of war from an Iraqi hospital fueled a strong buying spree that never let up throughout the trading session.

"The perception is that maybe things are getting better. I mean, how much more can these guys take?" said Donald Selkin, director of research at Joseph Stevens. "We've bombed the hell out of [Iraq], and we have them surrounded."

Thursday likely will bring further developments on the war front for investors to consider, amid more economic reports.

Before the opening bell Thursday, the government plans to report on initial jobless claims for the week ended March 29. Economists polled by Briefing.com expect claims rose to 410,000 from 402,000 in the previous week. While the weekly numbers often are not a huge market mover, the report precedes a larger take on unemployment for the month, due Friday.

Also Thursday, investors will get a reading on the services sector from the Institute for Supply Management, due at 10 a.m. ET. Economists forecast that index fell to 52.5 in March from 53.9 the previous month.

After the closing bell Wednesday, Dell Computer (DELL: Research, Estimates) reaffirmed its first-quarter guidance of an 18 percent gain in revenue, to $9.5 billion, and a rise of 35 percent in earnings per share, to 23 cents. Both fall in line with analysts' estimates, according to a survey by tracking firm First Call.

The foundation for the rally Wednesday was laid Tuesday when stocks ignored a surprisingly shoddy manufacturing report and headed higher. This reaction led some to believe that Wall Street may have found a comfort zone where it is able to absorb the bad news without losing too much ground in the process.

The reaction was similar Wednesday: The market didn't skip a single beat on its way higher, even after the release of a report showing factory orders fell in February by more than twice what had been expected.

"I think the markets will overlook the weak economic reports," Selkin said. "Everyone knows numbers in February and March were terrible due to the snow storms and oil prices."

Traders said stocks' newfound ability to shrug off dismal economic reports is a case of the market looking forward. Some said there is talk on the floor of a possible recovery in the second half and that there is a lot of cash on the sidelines.

"The market is usually ahead of a recovery, and in the past, the market was reacting to negative data," Heekin said. "It seems to be shaking off bad news now. To me, that's good news."

He added that while some traders are optimistic for signs of a recovery in the second quarter, he thinks the numbers will remain dismal at least until the second half. But, he said, at some point institutions are going to set a floor -- and the market will be poised to go higher.

Market breadth was strongly positive, with eight stocks rising for every three declining on the New York Stock Exchange, on a volume of 1.6 billion shares. On the Nasdaq, more stocks rose than fell by a margin of more than two to one, and 1.6 billion shares changed hands.

The stock market's strength translated into weakness and rising yields for U.S. Treasury bonds. The 10-year note lost 28/32 of a point in price for a yield of 3.92 percent The dollar gained against both the euro and the yen.

Oil and gold retreated amid the hopes that the war won't last that long after all and as investors shifted money back into stocks. Light crude oil for May delivery lost $1.22 to $28.56 a barrel in New York. Gold for June delivery plummeted $4.80 to trade at $330.40 an ounce.

Stocks in Asia and Europe rallied to higher closes.