Reuters - U.S. stocks rose on Thursday as decent holiday spending data helped the Dow notch another record closing high while benchmark Treasury yields neared a two-year high of 3 percent after the government reported that fewer Americans sought jobless benefits.

Volume was light with most markets around the world closed, but traders who were at their desks focused on an improved U.S. economic outlook, which has kept the Dow on its longest winning streak since March. The S&P 500 also hit a record closing high.

Retail stocks rallied after data published by MasterCard Advisors SpendingPulse said sales between Nov. 1 and Dec. 24 rose 2.3 percent, bucking concerns that the holiday season had been weak.

Elsewhere, the number of Americans filing for initial jobless benefits fell to its lowest level in nearly a month, another sign that the job market is slowly improving.

Unemployment is still historically high, however, and some analysts fear this year's blockbuster stock rally -- the benchmark S&P 500 has gained 29 percent so far in 2013 -- could be disrupted by a painful correction in early 2014.

"I don't get why we seem to have an eternally upward market, but it looks like that's what we have," said Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh. "There's no reason to sell stocks, but also not much reason to buy except for that fact that we continue to be poised to go higher."

The Dow Jones industrial average ended up 122.33 points, or 0.75 percent, at 16,479.88. The Standard & Poor's 500 Index closed up 8.70 points, or 0.47 percent, at 1,842.02. The Nasdaq Composite Index closed up 11.76 points, or 0.28 percent, at 4,167.18.

Earlier, retail investors helped drive Tokyo's Nikkei share average to a six-year high, leaving it on track for its best yearly performance since 1972.

Aggressive monetary stimulus in both Japan and the United States has helped boost asset prices this year, though better U.S. labor market conditions prompted the Federal Reserve to announce it would begin withdrawing support for the economy next year by reducing its monthly asset purchases.

The divergence between the U.S. and Japanese growth outlooks and monetary policies helped the dollar hit a five-year high against the yen, just shy of 105 yen, and nudged 10-year Treasury yields to 2.99 percent after touching 3 percent overnight.

If that trend continues, it could make for rough sailing in other assets, including stocks and commodities.

The 10-year Treasury yield is a benchmark for mortgage rates and investment returns, and higher borrowing costs could slow a recovery that's gathered speed as it heads into 2014.

"Other markets will take notice if we establish a foothold above 3 percent," said Rob Zukowski, senior technical analyst at 4Cast Ltd in New York.

Elsewhere, Brent oil settled 8 cents higher at $111.98 a barrel while U.S. crude rose 33 cents to $99.55. Stronger demand for refined products and supply disruptions in Africa, with South Sudan cutting output, helped support prices.

Gold gained nearly 1 percent in thin trade but was still set for its biggest annual loss in three decades as rising optimism about growth pushes investors into stocks.