NEW YORK (CNN/Money) - U.S. stock markets staged a late-day rally to end the session higher Thursday, as some early profit-taking made way for buyers searching for deals and looking to secure positions ahead of the long Labor Day weekend.

The Nasdaq composite (up 18.05 to 1800.18, Charts) added about 1 percent, reaching the 1,800 level for the first time in more than 16 months.

Meanwhile, the Dow Jones industrial average (up 40.42 to 9374.21, Charts) bounced 0.4 percent, and the Standard & Poor's 500 index (up 6.05 to 1002.84, Charts) advanced 0.6 percent.

"The market this morning moved up on the good economic numbers," said Peter Cardillo, director of research at Global Partners Securities. "It was a confirmation of what the market has been saying."

Stocks lingered near unchanged throughout most of the session, after a short-lived bounce at the open, until staging a rally in the last hour of trading. A better-than-expected report on gross domestic product and positive data on new jobless claims buoyed stocks throughout the day and added some strength to the late-day rally. Meanwhile, gains in the retail sector helped to ease the profit-taking pressure.

Though Friday is likely to be a slow day heading into the long Labor Day weekend, a few events may get some attention from investors. Readings on personal income, expected to rise 0.3 percent in July after an 0.3 percent gain in June, and personal spending, expected to jump 0.8 percent in July after rising 0.3 percent in the prior month, were set for before the opening bell.

A revision of the Michigan consumer sentiment index for August was scheduled for just after trading begins Friday. Economists expect the reading to be virtually unchanged from the prior reading, moving up to 90.4 from 90.2, according to Briefing.com.

But a bigger market mover could be the Chicago-area purchasing managers' index for August. The reading, set for 10 a.m. ET, is expected to come in at 56, according to Briefing.com, slightly above July's 55.9. Any number above 50 represents manufacturing expansion.

Traders also said they will be waiting to hear what Federal Reserve Chairman Alan Greenspan has to say during a speech at the Kansas City Fed's annual economic symposium in Jackson Hole, Wyo.

The day's upbeat economic reports had a muted, though positive, effect on the market. The Commerce Department said gross domestic product rose at an annual rate of 3.1 percent in the second quarter, better than the 2.9 percent growth economists expected and up from an earlier estimate of 2.4 percent.

Separately, the government said the number of new unemployment benefits claims last week rose to 394,000 from a revised 391,000 in the week before. Investors appeared content that the jobless claims held below the 400,000 level, indicating that, at the very least, the economy is not bleeding jobs as fast as it had been earlier in the year.

Though equities investors found some comfort in the numbers, traders have said expectations for better economic reports already have been priced into the market, and that it would take a big surprise to convince Wall Streeters to drop more cash into stocks. Investors are waiting for proof of an increase in business spending and a sharp long-term drop in unemployment before going in full-force, traders said.

But the jobless claims report was weak enough to give some investors reason to buy bonds and push Treasury yields lower. At 4:30 p.m. ET, the 10-year note gained 26/32 of a point in price and its yield slipped to 4.42 percent from 4.52 percent late Wednesday. The dollar fell against the yen and the euro.

Volume was relatively light, as it has been in previous sessions this week, since many traders and investors took vacation or left early for a long weekend ahead of the Labor Day holiday on Monday.

Market breadth was positive, with advancers outnumbering decliners more than two to one on the New York Stock Exchange, where 1.2 billion shares changed hands, and about three to two on the Nasdaq, where 1.4 billion shares traded.

"With light volume, we're going to bounce around like a ping-pong ball," said Jack Ablin, chief investment officer at Harris Trust. "I wouldn't take any moves this week as a clear indication of anything."

On the corporate front, automakers garnered attention. Goldman Sachs upgraded General Motors (GM: up $1.01 to $40.41, Research, Estimates) to "in-line" from "underperform" and downgraded Ford (F: down $0.20 to $11.44, Research, Estimates) to "underperform" from "in-line." GM rose 2.6 percent, and Ford lost 1.7 percent.

Several retailers headed higher, giving support to the markets, after posting better quarterly financial results.

Michaels Stores (MIK: up $5.33 to $44.76, Research, Estimates), the nation's largest arts and crafts retailer, soared 13.5 percent after it reported second-quarter earnings that beat analysts' average estimate by 2 cents a share, according to tracking firm First Call.

Pet goods retailer PetSmart (PETM: up $2.39 to $23.34, Research, Estimates) jumped 11.4 percent after reporting second-quarter earnings that came in 2 cents above estimates. The company also said its full-year results would come in above analysts' forecasts.

Discount chain Dollar General (DG: up $1.60 to $22.52, Research, Estimates) spiked 7.7 percent after posting a profit that beat forecasts by 4 cents a share, while clothier Chico's (CHS: up $2.75 to $31.65, Research, Estimates) jumped 9.5 percent after reporting quarterly earnings of 28 cents a share, 2 cents better than Wall Street's average expectation.

European markets closed the day mixed. Stocks ended mostly lower in Asia.

NYMEX light sweet crude oil futures rose 29 cents to $31.50 a barrel in New York. COMEX gold fell $2.50 to $371.60 an ounce.