US STOCKS-Department store earnings power Wall Street rally

(Adds dropped word to clarify number of Americans applying for unemployment benefits, paragraph 12)

* Weekly jobless claims fall to 266,000 from 269,000

* Alibaba jumps as revenue soars

* Indexes up: Dow 0.6 pct, S&P 0.43 pct, Nasdaq (NasdaqGS: NDAQ - news) 0.35 pct

By Yashaswini Swamynathan

Aug 11 (Reuters) - U.S (Other OTC: UBGXF - news) . stock indexes came at shouting distance from their record highs as strong results from department store chains and robust labor market data buoyed investor sentiment about economic growth.

Oil prices rose nearly 2 percent, supporting the rally, after the International Energy Agency forecast crude markets would rebalance in the next few months.

Strong earnings from Macy's and Kohl's kicked off the two-day department store chains' earnings on a positive note.

Macy's shares soared more than 15 percent after the department store operator reported a smaller-than-expected drop in quarterly comparable-store sales and said it would close 100 stores.

Kohl's shares rose 14 percent after its quarterly profit beat estimates.

The rally in department stores' shares pushed up the S&P 500's consumer discretionary index 0.87 percent.

Nordstrom (NYSE: JWN - news) rose 6.4 percent in the run-up to the results after market closes, while J.C. Penney, which reports on Friday, was up 8 percent.

Macy's was the top percentage gainer on the S&P 500, followed by Kohl's and Nordstrom.

"It (Other OTC: ITGL - news) looks like U.S. markets are going to go higher until my daughter graduates, and she's only 3 years old," said Erik Wytenus, global investment specialist at J.P. Morgan Private Bank in Palm Beach Florida.

While economic data has been solid, people are calling the movement an "unloved rally", Wytenus said.

Better-than-expected second-quarter earnings and a set of strong economic data have helped the S&P 500 to break its record intraday highs 11 times since early July.

Robust data continued on Thursday, with a report that showed the number of Americans applying for unemployment benefits fell to 266,000 from 269,000 the week earlier, continuing a trend of being below the 300,000 mark for the 75th consecutive week.

At 10:59 a.m. ET (1459 GMT), the Dow Jones Industrial Average was up 111.01 points, or 0.6 percent, at 18,606.67.

The S&P 500 was up 9.41 points, or 0.43 percent, at 2,184.9.

The Nasdaq Composite was up 18.21 points, or 0.35 percent, at 5,222.79.

Alibaba rose 5 percent after the Chinese e-commerce giant posted a 59 percent jump in quarterly revenue. Yahoo (Hanover: YHO.HA - news) , which owns a stake in Alibaba, rose 3.4 percent.

Valeant fell 7 percent after the Wall Street Journal reported that U.S. federal prosecutors had opened a criminal investigation on the drugmaker.

Advancing issues outnumbered decliners on the NYSE by 1,861 to 986. On the Nasdaq, 1,624 issues rose and 972 fell.

The S&P 500 index showed 25 new 52-week highs and no new lows, while the Nasdaq recorded 64 new highs and 24 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Don Sebastian)