U.S. stocks ended sharply higher Thursday, rallying on economic data, better-than-expected earnings and dovish comments from European Central Bank President Mario Draghi.

Draghi indicated the central bank could move next month to expand stimulus measures in the face of sluggish global growth that is exacerbating worries about persistently low inflation in the eurozone. Those remarks were enough to help the Dow Jones Industrial Average register its biggest point and percentage gain since Sept. 8.

After Draghi said the door is open to more quantitative easing, the euro EURUSD, -0.35% moved below $1.12, consequently lifting the U.S. dollar.

Randy Frederick, managing director of trading and derivatives at Schwab Center for Financial Research, said the market’s rally might have been fueled by the idea that the Federal Reserve will be forced to keep rates lower for longer as central bankers around the world adopt a more dovish stance.

“If they are going to implement additional easing in Europe that puts that much more pressure on the Fed to not hike in December,” Frederick said.

Relatively upbeat earnings added to the sanguine market atmosphere created by McDonald’s Corp. MCD, +0.50% , whose third-quarter results topped analysts’ forecasts.

Colin Cieszynski, senior market analyst at CMC Markets, said he believed stronger-than-expected earnings are helping sentiment. “On balance, earnings were a little bit better than expected,” he said.

The Dow Jones Industrial Average DJIA, +0.01% advanced 320.55 points, or 1.9%, to 17,489.16. McDonald’s contributed about 54 points to the gains in the blue-chips gauge.

The S&P 500 index SPX, -0.30% jumped 33.57 points, or 1.7%, to 2,052.51, with only health-care stocks falling, down 0.5%. The Nasdaq Composite Index jumped 79.93 points, or 1.7%, to 4,920.05.

Brad McMillan, chief investment officer at Commonwealth Financial Network, said fears about waning growth in China—the world’s second largest economy—are subsiding, underpinning buying appetite.

“I think that what you’re seeing is a realization that the world isn’t going to end after all,” said McMillan. Late-summer fears resulted in U.S. stock indexes experiencing their worst rout in years.

A rise in the dollar and a rally in stocks isn’t typical, especially since a stronger greenback has proved a headwind to company revenues. But the idea of more dovish actions by the Fed, which will convene for its two-day policy meeting next week, may explain the rally, Schwab’s Frederick said. Signs that the U.S. central bank may hold off on lifting rates for the first time in nearly a decade has bolstered appetite for risky assets like stocks in an ultralow interest-rate environment.

Cieszynski said he believed that markets were being coaxed higher on the expectation that central bankers like Draghi would make efforts to stem worries about slowing global growth.

“If Europe comes out with more stimulus that improves the earnings prospects for U.S. companies that do business in Europe as well,” he said.

Read ECB Live blog: Pressure mounts on Mario Draghi to provide more stimulus

Investors also were heartened by strong economic data, including an employment report that showed the four-week average of initial jobless claims fell to its lowest level in four decades, suggesting that the jobs market remains solid amid questions about global growth.

Thursday’s march higher comes on the heels of a downbeat session on Wednesday when a short seller’s allegations about improprieties at Valeant Pharmaceuticals International Inc. US:VRX weighed on the health-care sector and pressured the broader market. Health-care was still a laggard in Thursday’s trade with Valeant’s shares trading 7.4% lower, after a 19% tumble Wednesday.

Shares of Valeant traded off their lows of the session after the company said it would host an investor conference on Monday to explain its accounting practices and its relationship with specialty drug companies, which has come into question.

Other data: U.S. home prices rose to a seasonally adjusted 0.6% in July, according to the Federal Housing Finance Agency.

The National Association of Realtors also reported a 4.7% rise in existing-home sales to a seasonally adjusted annual rate of 5.55 million, marking the second-highest monthly level since just before the housing market collapsed in 2007.

Thursday’s earnings: Corporate news was also among Thursday’s highlights, with a long list of companies reporting earnings.

Doughnut chain Dunkin’ Brands Group Inc. DNKN, +0.07% said third-quarter adjusted earnings rose to 52 cents a share, slightly beating estimates, but its shares ended down 3.6%.

Shares of Eli Lilly & Co. LLY, -0.06% finished little changed Thursday after the drug maker raised its 2015 earnings forecast after third-quarter profit beat estimates.

Dow Chemical DOW, -0.28% ended 5.1% higher after announcing a dividend hike and a share buyback.

Sports-clothing maker Under Armour Inc. UA, +5.66% finished 5.4% lower after raising its 2015 revenue forecast.

Southwest Airlines Co. LUV, +0.99% closed 7.4% higher after posting an 83% rise in third-quarter profit.

Post-it Notes maker 3M Co. MMM, +0.61% said it was cutting some 1,500 jobs as a part of a broad restructuring, while machinery company Caterpillar CAT, +0.04% slashed its outlook after its profit tumbled 64%.

Movers & shakers: Shares of eBay Inc. EBAY, +0.31% jumped nearly 14% to lead S&P 500 gainers after the online marketplace late Wednesday reported earnings ahead of expectations.

Texas Instruments Inc. TXN, -1.50% gained 11.9% after the electronics company late Wednesday reported stronger-than-expected profit and revenue for its third quarter.

Michael Kors Holdings Ltd. US:KORS fell 0.4% before the bell after news that billionaire investor David Einhorn’s Greenlight Capital hedge fund has taken new long positions in the retailer.

GNC Holdings Inc. US:GNC, saw its shares pummeled after the Oregon Attorney General Ellen Rosenbaum said she was suing the company, alleging that dietary supplements it sold included ingredients banned in the U.S. GNC refuted the claims in a statement.

Other markets: Asian markets closed mixed, but with the Shanghai Composite Index SHCOMP, +0.16% jumping 1.5%.