The Dow Jones Industrial Average and S&P 500 set new highs Thursday, kindling hopes among some investors that buoyant U.S. stocks are on track to exceed Wall Street’s performance expectations for 2018.

The blue chips surged more than 250 points to cap a three-day run of gains, the latest leg of a nine-year rally that hurtled the index to its first record close since Jan. 26. The stock market’s rise has coincided with a pause in the U.S. dollar’s climb and a recent spike in government-bond yields, a signal investors are viewing...