US STOCKS-Wall St jumps on optimism before jobs data

* Crude prices lower after Libyan peace plan put forth

* Jobless claims unexpectedly drop to 2-1/2 year low

* Retailers post strong Feb sales, March concerns loom

* Indexes up: Dow 1.5 pct, S&P 1.6 pct, Nasdaq 1.9 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Updates to afternoon)

By Edward Krudy

NEW YORK, March 3 (Reuters) – U.S. stocks rallied on
Thursday as oil prices slipped and better-than-expected
economic data raised expectations of a strong U.S. employment
report on Friday.

With oil prices pausing from their recent climb, investors
focused on the U.S. economy, which has shown steady improvement
in reports this week. Many believe the Labor Department’s
report could be a turning point for the recovery.

“The expectations are high,” said Bill Strazzullo, partner
and chief investment strategist at Bell Curve Trading in
Boston. “I don’t think anybody wants to be short going into
tomorrow’s payrolls number.”

The “whisper number” among traders is that non-farm
payrolls will rise by over 200,000, compared to a median
estimate of 185,000 by economists polled by Reuters.

Industrial stocks led the market higher, boosted by a
weaker dollar and an improving outlook for global demand. The
S&P industrial index (.GSPI: Quote, Profile, Research) gained 2.4 percent, with
Caterpillar Inc (CAT.N: Quote, Profile, Research) up 3.1 percent to $104.11.

The Dow Jones industrial average (.DJI: Quote, Profile, Research) gained 181.41
points, or 1.50 percent, to 12,248.21. The Standard & Poor’s
500 Index (.SPX: Quote, Profile, Research) rose 20.24 points, or 1.55 percent, to
1,328.68. The Nasdaq Composite Index (.IXIC: Quote, Profile, Research) added 50.93
points, or 1.85 percent, to 2,799.00.

Stocks have shown resilience in the face of economic
headwinds. The broad S&P 500 is down only about 1 percent from
a peak in late February after falling around 3 percent due to
growing violence in oil-producer Libya.

“It is showing you that there is enough cash on the
sidelines that has missed the boat and wants in,” said Scott
Marcouiller, chief technical market strategist at Wells Fargo
Advisors in St. Louis.

However, volume continues to be below average on days when
the market rallies, leading some to question the conviction
behind upward moves.

“We’re up a ton, but the feeling is apathetic,” said Ken
Polcari, managing director at ICAP Equities, a New York Stock
Exchange floor broker.

The Arab League said a peace plan for Libya was under
consideration. The plan put forth by Venezuelan President Hugo
Chavez, if successful, could end a major headwind for equities.
For details, see [ID:nLDE72200E]

April U.S. crude futures fell 1.7 percent to $100.45 per
barrel while Brent crude fell 2.3 percent to $114.04.

Initial jobless claims fell last week to 368,000 — a 2-1/2
year low — one day after a robust report on private-sector
hiring. [ID:nOAT004756]

In other economic news, the Institute for Supply
Management’s non-manufacturing index rose to 59.7 in February,
slightly above forecasts and higher than the January result.
[ID:nEAP101300]

Several top U.S. retailers posted bigger-than-expected
sales gains for February. The S&P retail index (.RLX: Quote, Profile, Research) rose 0.7
percent. [ID:nN03203429]

Retailers Saks Inc (SKS.N: Quote, Profile, Research) and Nordstrom Inc (JWN.N: Quote, Profile, Research) beat
forecasts, helped by Valentine’s Day sales. Saks shares rose
6.1 percent to $12.44, while Nordstrom gained 1.7 percent to
$44.97.

Close-out retailer Big Lots Inc (BIG.N: Quote, Profile, Research) shares rose 3.4
percent to $41.25 after it forecast strong 2011 profits.

H.J. Heinz Co (HNZ.N: Quote, Profile, Research) rose 0.4 percent to $49.17 after
quarterly income topped expectations and news of a deal to buy
an 80 percent stake in a Brazilian food maker. [ID:nL3E7E3109]
[ID:nN0374843]

(Editing by Kenneth Barry)