The truce was announced by Egypt's foreign minister and confirmed by Israeli Prime Minister Benjamin Netanyahu. A week of fighting has killed more than 140 Palestinians and five Israelis.
The Dow Jones industrial average climbed 48.38 points to 12,836.89. Three of the most expensive stocks in the average -- Boeing, IBM and United Technologies -- each rose more than 60 cents.
The Labor Department said that first-time applications for unemployment benefits fell by 41,000 last week to 410,000. The figure remains temporarily high because of Superstorm Sandy and was in line with what economists had expected.
"The news today didn't mess anything up," said Harry Clark, CEO of Clark Capital Management, an investment advisory firm in Philadelphia. "With no bad news, this market will drift higher."
That's partially because investors have stopped worrying as much about the "fiscal cliff" of tax increases and government spending cuts that are set to take effect Jan. 1, Clark said.
Over the past week, congressional Republicans and Democrats have made conciliatory remarks and raised hopes that they will reach a deal to stave off the full effect of the budget-tightening measures.
While the cuts would hurt the economy gradually, they could be enough to push the U.S. back into recession next year, economists have warned.
"Both sides appear to have extended an olive branch," said JJ Kinahan, chief derivatives strategist at TD Ameritrade. "The assumption now is that, it may not be pretty, but at the end of the day they'll get some compromise worked out."
In other Wednesday trading, the Standard & Poor's 500 index gained 3.22 points to 1,391.03. Utilities fell the most, while telecommunication companies rose the most, but no category moved more than 0.6 percent.
The Nasdaq composite index rose 9.87 points to 2,926.55. In the bond market, the yield on the benchmark 10-year U.S. Treasury note inched up to 1.68 percent.
The quiet trading followed a largely uneventful Tuesday. The Dow dropped as much as 94 points after a warning from Federal Reserve Chairman Ben Bernanke about federal budget talks, then recovered to end with just a seven-point loss.
The stock market will be closed Thursday for Thanksgiving and will close early Friday. Congress has the week off and will take up budget negotiations after its members return from the break next week.
Among companies making news:
-- Deere, the maker of tractors and other farm and construction equipment, dropped 4 percent. It reported a quarterly profit of $1.75 per share, missing Wall Street expectations of $1.88.
-- Chipotle Mexican Group, the restaurant chain, climbed 3 percent. It announced late Tuesday that it would buy back an additional $100 million of its own stock. That's in addition to a $100 billion buyback plan launched Oct. 18.
-- Zale plunged 30 percent after the jewelry store chain reported a larger loss than analysts had expected. The company, which runs Zales stores and Piercing Pagoda kiosks, posted weaker sales. Jewelry store sales sank during the recession and have yet to recover.
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