NEW YORK ( TheStreet) -- Stocks finished higher Thursday for the first time in four days, as positive U.S. economic data helped offset fears about Japan's ability to prevent a nuclear meltdown.

A day after the Dow Jones Industrial Average saw its largest decline since August 2010, the Dow added 161 points, or 1.4%, to close at 11,774. The S&P 500 rose 17 points, or 1.3%, to close at 1274 and the Nasdaq gained by 25 points, or 0.9%, at 2642.

Energy shares were among the session's biggest gainers with Chevron ( CVX) among the Dow's top performers alongside Hewlett-Packard ( HPQ) and Pfizer ( PFE). McDonalds ( MCD), Kraft Foods ( KFT), Cisco ( CSCO) and Wal-Mart ( WMT) were the only components that finished in the red.

Peter Cardillo, chief market economist at Avalon Partners, said there were two factors at play behind Thursday's rally.

"One, we had a rebound in the foreign markets this morning, and I think yesterday's deceleration was due to some misinterpretations of comments regarding Japan," he said. "The Japanese are continuing to try and prevent a nuclear meltdown, which I think is helping stocks, but the economic numbers today are also fortifying the market's rebound."

The Labor Department said Thursday that initial jobless claims shed 16,000 to 385,000 in the week ended March 12, from 401,000, previously. According to Briefing.com, economists had expected claims to shed 11,000 to 386,000.

Manufacturing activity in the Philadelphia region also jumped to 43.4 in March, far exceeding the reading of 28.1 that economists had expected. In February, the Philadelphia Federal Reserve Bank's Philadelphia Fed index came in at 35.9.

A 0.1% drop in industrial production and a 0.5% increase in headline consumer inflation were disappointing reports that were largely dismissed by the market.

The Conference Board said leading indicators rose 0.8% in February, coming in just short of the jump of 1% that analysts had been expecting, according to Briefing.com. In January, leading indicators rose 0.1%.

Markets continued to keep an eye on the nuclear power plant crisis in Japan. On Thursday, Japanese military helicopters released 100 tons of sea water onto the damaged Fukushima Daiichi nuclear reactor in an attempt to avoid a complete meltdown. According to press reports, the efforts had helped lower radiation levels slightly, though the situation remains fluid.

Investors remain uncertain about the impact of the natural disaster on the Japanese economy and, in turn, the global recovery.

According to a Barclays Capital ( BCS) analysis, damages from Japan's earthquake and tsunami, planned blackouts and energy conservation, nuclear power plant issues and battered equities could cause the country's GDP to fall by 3% this year. Analysts Kyohei Morita and Yuichiro Nagai said costs could run between $151.98 billion and $215.3 billion.

Hong Kong's Hang Seng lost 1.8% and Japan's Nikkei fell 1.4% on Thursday. London's FTSE gained 1.7% and the DAX in Frankfurt finished ahead by 2%.

Volumes were high, signaling frenetic trading activity. More than 800 million shares traded on the New York Stock Exchange. About 71% of the stocks listed on the big board advanced, while 27% declined. On the Nasdaq, 1.8 billion shares changed hands.

Motorola Mobility ( MMI), Cliffs Natural Resources ( CLF), Akamai Technologies ( AKAM) Noble Energy ( NBL) and Consol Energy ( CNX) were the biggest gainers on the S&P 500.

Shares of FedEx ( FDX) rose 3% to close at $87.89 after it projected better-than-expected earnings for the current quarter. CEO Fred Smith also made reassuring comments on Japan, saying that the economic impact, assuming no great impact from the nuclear plant, would be minimal.

Retailer Guess? ( GES) reported fourth-quarter adjusted earnings that met analysts' estimates but issued disappointing guidance late Wednesday. On Thursday, shares plunged 14% to $37.71.

Shares of Lululemon Athletica ( LULU) slid 3.8% to $76.37, despite a strong fourth-quarter earnings beat and first-quarter guidance. Analysts are expressing skepticism over its ability to consistently beat expectations and match its own guidance.

Nike ( NKE) was falling 5% in aftermarket trading after its fourth-quarter profit missed expectations. The company reported an earnings per share of $1.08 per share on revenues of $5.07 billion. Analysts expected the company to report earnings per share of $1.11 on $5.17 billion.

Market attention was focused on the dollar-yen trade after the yen soared to a record high in early Asian market trades. The U.S. dollar was trading at 78.90 yen after hitting a low of 76.25 yen earlier, on expectations of intervention from the Bank of Japan.

The yen has been rising since the earthquake on expectations that Japanese investors will sell overseas assets, including U.S. treasuries, and repatriate them into their home country to help the rebuilding effort. Japan is overburdened with debt, but the Japanese people also held $2 trillion in foreign assets as of end of 2010, according to a Wall Street Journal report.

The dollar index was down by 0.4% at $75.97. The benchmark 10-year Treasury fell 12/32, lifting the yield to 3.25%.

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In commodity markets, the April crude contract gained $3.44 to settle at $101.42 a barrel. The U.N. is set to vote on a resolution that will authorize military air strikes on Libya later this evening.

The April gold contract gained $8.10 to settle at $1,404.20 an ounce.

--Written by Melinda Peer and Shanthi Bharatwaj in New York.
Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.