U.S. stocks rallied on Thursday, putting the S&P 500 on track to snap a five-day retreat, after Spain unveiled its plans for economic reform to deal with its debt crisis.

The fiscally troubled nation announced a detailed timetable for economic reforms and a tough 2013 budget based mostly on spending cuts.

The EU's Economic and Monetary Affairs Commissioner, Olli Rehn, said Spain's detailed timetable for economic reforms goes beyond what the European Commission has asked of Spain. Rehn said it is an ambitious step forward.

"Spain is doing basically everything the EU wants, and they are setting up for the potential bailout," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

"It's just a matter of can they keep control over some provinces that are starting to look at bolting, and can they keep control of the population, in terms of not creating political instability in the country."

The rally put the benchmark S&P 500 index on track for its biggest percentage gain since the Federal Reserve announced its plan for a third round of stimulus on September 13.

Equities had staged a modest advance before Spain's announcement on hopes that China would take steps to spur its slowing economy.

China has severely underestimated this year's global economic slowdown, and further cuts to Chinese interest rates or bank reserve requirements will hinge on any new deterioration in the external environment, a central bank adviser said on Thursday.

The comments underlined a confidence that global central banks were in lockstep with regards to stimulating their economies, after monetary easing plans were put in place by the European Central Bank and the Federal Reserve.

A bright spot among the domestic economic data released on Thursday came from initial jobless claims, which dropped by 23,000 to 359,000, significantly more than the decline of 4,000 that had been expected.

But the final read on second-quarter gross domestic product showed growth of just 1.3 percent, weaker than an expected 1.7 percent. And August durable goods orders tumbled 13.2 percent, much more than the expected drop of 5 percent.

The Dow Jones industrial average <.DJI> gained 74.55 points, or 0.56 percent, to 13,488.06. The Standard & Poor's 500 Index <.SPX> gained 12.77 points, or 0.89 percent, to 1,446.09. The Nasdaq Composite Index <.IXIC> gained 36.24 points, or 1.17 percent, to 3,129.94.

The semiconductor index <.SOX> gained 1.8 percent, bolstering the Nasdaq 100 <.NDX>. Intel Corp was up 1.4 percent at $22.96.

Pending home sales fell 2.6 percent in August, compared with expectations for flat growth, due to a shortage of lower-priced inventory in most of the country.

Despite the weaker home sales data, homebuilders' shares advanced. An index of housing stocks <.HGX> shot up 1.6 percent.

Financial shares rose. Discover Financial Services , shares climbed 5 percent to $38.87 on third-quarter earnings that beat expectations. The S&P financial sector index <.GSPF> gained 1.1 percent.

Hewlett-Packard Co shares inched up 0.1 percent to $17.13, reversing a morning decline after Jefferies downgraded the Dow component's stock to "underperform." The brokerage said it expected continued problems in HP's personal computer segment.

On the deal-making front, Tempur-Pedic International Inc agreed to buy rival mattress maker Sealy Corp for about $242 million and assume about $750 million in debt. Tempur-Pedic shares soared 16.1 percent to $31.08, while Sealy's stock rose 2.3 percent to $2.19.

(Editing by Jan Paschal)