Stocks surged Thursday to their highest levels in two months after banking giant Wells Fargo & Co. surprised the market with an early profit report that blew past analysts' expectations thanks to a strong pickup in its lending business.

The Dow Jones industrial average jumped nearly 250 points and major market indexes logged their fifth straight week of gains. Markets are closed for Good Friday.

Investors have been grasping at any sign of improvement in the crippled banking industry, and Wells Fargo's report Thursday that it expects first-quarter earnings of $3 billion provided an encouraging sign that a deep freeze in borrowing activity may finally be thawing. Wells Fargo said it benefited from its January acquisition of Wachovia and an increase in mortgage applications.

"The fact that Wells Fargo can have record profits despite the troubles facing the banking system tells you something," said Rick Campagna, chief investment officer at 300 North Capital in Pasadena, Calif. "It's very good news."

The Dow and the Standard & Poor's 500 index ended at their highest levels since Feb. 9 and the Nasdaq posted its highest finish of the year, giving it a gain of 4.8 percent for 2009.

The Dow rose 246.27, or 3.1 percent, on Thursday to 8,083.38.

Broader stock indicators also put up big gains. The Standard & Poor's 500 index rose 31.40, or 3.8 percent, to 856.56. The Nasdaq composite index rose 61.88, or 3.9 percent, to 1,652.54.

For the week, the Dow rose 0.8 percent. The blue chips hadn't logged five straight weekly gains since Oct. 2007, the stock market's peak.

The S&P 500 rose 1.7 percent for the week, while the Nasdaq added 1.9 percent.

Wells Fargo's announcement injected a decisively upbeat tone into the market after three days of choppy trading. For most of the week stocks appeared to be taking a breather after barreling ahead more than 20 percent in March. Analysts see occasional pullbacks as signs of a healthy market as investors allocate money carefully instead of just following a frenzied crowd.

Though even with the rapid rise in the past month the Dow is still down by 42.9 percent from its Oct. 9, 2007 high.

Bank shares had been sluggish this week following worrisome forecasts from key analysts about the bad loans they still carry on their balance sheets and other long-term woes. Major banks begin reporting first-quarter results next week.

Wells Fargo jumped 31.7 percent Thursday and several other major banks also barreled higher, including Bank of America Corp., which added 35.3 percent. JPMorgan Chase & Co. rose 19.4 percent, and Citigroup Inc., up 12.6 percent.

Investors appeared unfazed by uneven monthly sales reports from retailers and mixed economic news.

Wal-Mart Stores Inc. reported lower-than-expected sales in March, sending its shares down 3.7 percent. It was one of only three stocks to fall among the 30 companies that make up the Dow industrials.

Target Corp. rose 6.1 percent after posting results that topped expectations, while teen clothing retailer Abercrombie & Fitch Co. slid 3.5 percent after its numbers came in weaker than predicted.

In economic news, new jobless claims fell more than expected last week, but those continuing to receive unemployment benefits set another high. The total number of laid-off Americans receiving unemployment rose to 5.84 million from 5.75 million, the most on record since 1967 and more than analysts expected.

The jump in stocks comes at the end of a relatively quiet week.

Investors have been worried that corporate earnings reports that began to trickle in this week could bring bad news about how companies expect the rest of the year to turn out. But the market's tone brightened somewhat on Wednesday on reports that the government will provide support for battered life insurers and a merger deal between two major homebuilders.

Ted Aronson, a partner at Aronson-Johnson-Ortiz in Philadelphia, said Wells Fargo's upbeat preview into its earnings could place a greater burden on banks reporting results next week. Wells Fargo doesn't report its full results until April 22.

"I'm not sure everyone will be as successful, but we'd like to hope that the success will spill over," Aronson said.

The upbeat mood Thursday sent one measure of the market's unease fell to its lowest levels since the fall. The Chicago Board Options Exchange Volatility Index, or the VIX, ended Thursday at its lowest level since Sept. 26. That signals investors are more confident they can predict the direction of stocks.

Ordinarily what's known as Wall Street's fear gauge might be in the 18 to 20 range but it hit 89.5 in October.

Still, analyst caution that some of Friday's buying could have reflected traders jumping to cover misplaced bets that stocks, particularly banks, would fall. Traders who sell stocks "short" are forced to step in and buy stocks to avoid further losses.

In other trading Thursday, the Russell 2000 index of smaller companies jumped 26.08, or 5.9 percent, to 468.20.

About seven stocks rose for every one that fell on the New York Stock Exchange. Volume came to 1.8 billion shares.

Treasury prices fell as the stock rally damped demand for safe-haven investments. The yield on the 10-year Treasury note rose to 2.92 percent from 2.86 percent late Wednesday.

The dollar rose against other major currencies, while gold prices fell.

Light, sweet crude rose $2.86 to settle at $52.24 on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average rose 3.7 percent following reports that the country's ruling party is seeking a stimulus package bigger than originally announced. Britain's FTSE 100 gained 1.5 percent, Germany's DAX index rose 3 percent, and France's CAC-40 rose 1.8 percent.