The government reported that the number of people who made first-time claims for unemployment benefits dropped to 418,000 last week, the lowest level in seven weeks. That's a sign that employers are laying off fewer workers.
Separately, private payroll processor Automatic Data Processing said companies hired 157,000 people in June. That's more than double the figure economists had forecast and far more than the 36,000 added the previous month.
The reports come a day before the Labor Department releases its monthly employment report. Economists estimate the unemployment rate will remain at 9.1 percent and that employers added only 90,000 jobs last month.
The Dow Jones industrial average is up 84 points, or 0.7 percent, to 12,709. The S&P 500 index is up 12, or 0.9 percent, to 1,350. The Nasdaq is up 24, or 0.8 percent, to 2,858.
Target, Limited Brands Inc. and other major retailers are reporting stronger sales for June. Target rose more than 6 percent in early trading, and Limited rose more than 3 percent. Both posted monthly sales that beat analysts' estimates.
Kohl's Corp jumped nearly 5 percent after reporting that sales increased by more than double what analysts expected. Kohl's credited warmer weather in the Midwest and Northeast with pushing customers to shop for summer clothing.
Stock indexes managed slight gains Wednesday even after a report showed the U.S. service industry expanded at a slower pace last month.
Trading has been light so far this week. Markets were closed in the U.S. on Monday for the July 4th holiday, and traders are looking ahead to Friday's employment report.