Stocks rose Thursday, with better-than-expected earnings reports from Exxon Mobil and Bristol Myers Squibb Co. spurring investor confidence and DaimlerChrysler shares surging after the announcement that its embattled CEO will leave at the end of the year.

Both the Nasdaq Composite Index (search) and the Standard & Poor's 500 indexes closed at their highest levels since the summer of 2001. The S&P is headed to its best monthly performance since December 2003. The Russell 2000 index edged up 1.2 percent, hitting an all-time record.

The Dow Jones industrial average (search) finished up 68.46 points, or 0.64 percent, to 10,705.55. The S&P 500 (search) advanced 6.93 points, or 0.56 percent, to 1,243.72. The Nasdaq rose 12.22 points, or 0.56 percent, to 2,198.44.

In another measure of stocks' strength, the New York Stock Exchange Composite index (search) climbed 0.7 percent to 7,518.08, an all-time high. Advancing stocks outnumbered decliners by a ratio of almost 3-to-1 on the NYSE and by more than 5-to-3 on the Nasdaq.

DaimlerChrysler (DCX) surged 9.8 percent, or $4.29, to $48.26 after the company also posted slightly improved earnings. The stock was also helped by CEO Juergen Schrempp's (search) announcement that he would leave by the end of the year.

Drug maker Bristol-Myers Squibb (BMY) rose 7 cents to $25.17 as the company posted a 91 percent surge in second-quarter income. Bristol-Myers credited strong sales of new drugs for the better-than-expected quarter. The company surpassed analysts' forecasts by 11 cents per share.

Dow component Exxon Mobil Corp. (XOM) said the recent surge in crude oil and natural gas prices were critical to its record second-quarter earnings, which rose 32 percent from a year ago. Although the energy company missed Wall Street's profit forecasts by a penny per share, Exxon Mobil added 40 cents to $60.

Strong earnings allowed investors to look past a slight rise in first-time jobless claims reported by the Labor Department and another rise in oil prices. A barrel of light crude settled at $59.94, up 83 cents, on the New York Mercantile Exchange (search).

Second-quarter profits of S&P 500 companies are now seen rising 10.1 percent, marking 13 straight quarters of double-digit profit growth, according to Reuters Estimates.

"All those cautious comments from management are gone, so we're looking for a bright second half," said Martin Yokosawa, senior portfolio manager at Oberweis Asset Management in Lisle, Illinois. "The market has been telling us that was going to happen since May, and it looks like it's going to go for a while."

The question on many investors' minds, however, was how high the markets can go, and whether the economy over the second half of the year will support those higher share prices.

"Obviously, we had a nice day yesterday, so now I tend to think that we're digesting all these earnings and figuring out whether we can move higher," said Jay Suskind, head trader at Ryan Beck & Co. "The news has been very good, but now the market's pricing in the second half of the year even more."

Investors will get a key piece of data on the economy on Friday when the government will release second-quarter gross domestic product figures. The advance report is forecast to show a 3.4 percent rise in GDP compared with a previous estimate of 3.8 percent.

Stronger sales helped defense contractor Northrop Grumman Corp. (NOC) raise its earnings 23 percent in the second quarter. Northrop, which also increased its full-year earnings forecasts, beat Wall Street's expectations by 12 cents per share. The company's stock nonetheless lost 52 cents to $56.18.

Shares of Genzyme Corp. (GENZ) gave the Nasdaq its biggest boost after the company said on Thursday a study showed one of its drugs significantly reduced the death rate of some kidney dialysis patients compared with another treatment. Genzyme's stock shot up 6.7 percent to $75.20.

Health insurer Aetna Inc. (AET) added $3.78 to $78.40 after the company saw a 43 percent jump in quarterly profits thanks to higher membership levels, cost cutting and strong underwriting results. Earnings per share were right in line with analysts' expectations, but Aetna's full-year outlook was slightly lower than Wall Street's forecasts.

Drug maker AstraZeneca (AZN) said its CEO, Tom McKillop, will retire at the end of the year as well. The company also saw a 50 percent rise in quarterly profits. AstraZeneca climbed $2.03 to $44.14.

Federated Department Stores Inc. (FD) added 47 cents to $76.24 after it announced plans to sell 68 stores, representing $2 billion in sales last year, as part of its consolidation from its recent merger with May's Department Stores. The company also said a number of May's stores — Famous-Barr, Filene's, Hecht's and Kaufmann's among them — will become Macy's branches in 2006.

Trading was heavy on the NYSE, with about 1.59 billion shares changing hands, above last year's daily average of 1.46 billion, while on Nasdaq, about 1.75 billion shares traded, more than last year's daily average of 1.81 billion.

The Russell 2000 index of smaller companies was up 8.16, or 1.21 percent, at 683.04.

Overseas, Japan's Nikkei stock average rose 0.2 percent. In Europe, Britain's FTSE 100 was up 0.13 percent, France's CAC-40 climbed 0.66 percent for the session, and Germany's DAX index gained 0.77 percent.

Reuters and the Associated Press contributed to this report.