NEW YORK - Stocks rose sharply Wednesday after a batch of economic reports offered some hope that the U.S. economy was improving.

Investors seized on encouraging readings on the labor market and Americans' incomes while shrugging off a steep fall in new home sales and manufacturing orders.

The rebound suggests that investors are no longer counting on a rebound in the housing market to prod the economy forward, said Tim Speiss, chair of the wealth advisory group at EisnerAmper.

"Markets have already ascertained there's no relief coming from the housing market," Speiss said.

Speiss said investors were right to focus on the improved signs in employment and consumer spending, which are far more important to an economic recovery than home sales or manufacturing orders.

"If we don't have strong consumer spending in this economy, we're in trouble," he added. "When there's spending, manufacturing will increase to meet that demand."

The upturn marked an abrupt reversal from Tuesday, when an exchange of artillery fire between North and South Korea led nervous investors to sell stocks and dash into gold, Treasurys and other assets often used as hiding spots.

The government said first-time claims for unemployment benefits fell 34,000 to 407,000 last week. That was much better than the 435,000 new claims economists had expected.

A separate report showed that Americans' incomes rose 0.5 percent last month, slightly better than expected. Their spending rose 0.4 percent, up slightly from September.

The Dow Jones industrial average rose 134, or 1.2 percent, to 11,171 in early afternoon trading.

The Standard & Poor's 500 index gained 15, or 1.3 percent, to 1,196. The Nasdaq composite index rose 47, or 1.9 percent, to 2,542.

Safety assets moved lower as investors became more willing to take on risk. The dollar and gold both fell, while Treasury prices edged lower, pushing their yields higher. The yield on the 10-year note inched up to 2.85 percent from 2.77 percent Tuesday.

Investors largely dismissed downbeat reports showing declines in sales of manufactured goods and new home sales. Orders for durable goods fell 3.3 percent, while new home sales and median home prices both fell last month. Sales of single-family houses slid 8.1 percent, the fourth time the rate has dropped in the past six months.

European stock markets rose. The Euro Stoxx 50, which tracks the shares of blue-chip companies in countries that use the euro, rose 0.6 percent.

In corporate news, the world's largest maker of farm equipment reported earnings that beat estimates. Deere & Co. posted a $457.2 million profit in the quarter ending Oct. 31, compared with a loss a year earlier. Tiffany & Co. also reported a rise in profit, fueled by strong sales of jewelry in the U.S. and overseas.

U.S. stock and bond markets will be closed Thursday for the Thanksgiving holiday. They will reopen for half-day sessions on Friday.