NEW YORK?US stocks extended gains Thursday as sentiment was lifted by a drop in the number of Americans registering for jobless benefits and the IMF's upward revision of global growth forecast.

The Dow Jones Industrial Average jumped 120.71 points (1.20 percent) to 10,138.99 at the close after surging by nearly three percent a day earlier.

The tech-rich Nasdaq composite index added 15.93 points (0.74 percent) to 2,175.40.

The S&P 500 index, a broader measure of the markets, climbed 9.98 points (0.94 percent) to a provisional close of 1,070.25.

Investors picked up bargains after the Labor Department said new claims for US unemployment benefits dipped more than expected last week.

Initial claims fell to 454,000 in the week ending July 3 from the previous week's revised figure of 475,000, the department said. Most economists had expected the latest weekly figure to be around 460,000.

"US equity markets (are) continuing yesterday's steep advance, as the bulls are finding some... motivation from a larger-than-forecasted decline in US weekly initial jobless claims," said analysts at Charles Schwab & Co in a clients' note.

Sentiment was also lifted by an upgrade to global growth by the International Monetary Fund despite renewed financial turbulence stemming from a European debt crisis.

The fund projected the world economy will grow by 4.6 percent, revising the 4.2 percent forecast in April, reflecting "stronger activity" during the first half of 2010 and expectations of fiscal action, especially in Europe.

"The timing could not be better as fears over the sustainability of the global economic recovery had manifested in the equity and bond markets," said analyst Kimberly DuBord at Briefing.com.

"Improving market sentiment could lift oversold sectors hurt by excessive pessimism."

Products and services company DuPont was the Dow's biggest earner, rising almost three percent. Shares in McDonald's were up 2.5 percent.

The bond market fell. The yield on the 10-year US Treasury bond rose to 3.031 percent from 2.980 percent Wednesday and that on the 30-year bond climbed to 4.012 percent from 3.954 percent.