The stock market roared ahead to new record levels Thursday, taking advantage of a strong employment report to post substantial gains in the half-day pre-holiday session. Signs of faster economic growth came as a welcome relief to investors after the difficult winter season, and with the Dow Jones Industrials managing to climb above the 17,000 mark, momentum could continue to carry stocks upward. PetSmart (UNKNOWN:PETM.DL), Lorillard (UNKNOWN:LO.DL), and PACCAR (NASDAQ:PCAR) were among the top performers on the day, adding to the general enthusiasm in the market Thursday.

Source: PetSmart.

PetSmart soared 12.5% as the big-box pet-products retailer got a push from activist investors at the JANA Partners hedge fund to jump onto the M&A bandwagon. This morning, JANA Partners revealed that it had taken an almost 10% stake in PetSmart, saying that the hedge fund will discuss possible value-enhancing strategies with the pet retailer's top executives. Specifically, JANA would like to see if PetSmart could return more capital to shareholders in the form of buybacks or dividends, as well as potentially pursuing an outright sale of the company. In response, PetSmart issued a release saying it welcomes open communications, and also wants to create shareholder value for its investors. JANA has a track record of similar efforts in the past, and PetSmart shareholders clearly believe that its efforts could be successful.

Source: Lorillard.

Elsewhere in the M&A world, Lorillard rose 5% as speculation once more arose that the tobacco company will combine with peer Reynolds American to create a giant in the industry. Reports today suggested that the companies could avoid potential antitrust problems by arranging to sell some of its assets to third-party players in the tobacco industry, with two U.K.-based tobacco companies among those possibly in the running. Investors have considered the possibility of a potential merger for months, but they continue to bid shares up as a possible endgame to the process becomes apparent.

PACCAR gained more than 5% on similar speculation that the truck maker might also be the target of an acquisition bid. For its part, Volkswagen denied any interest in acquiring PACCAR, countering comments from a top executive at one of its German auto-industry peers suggesting that a VW-PACCAR merger was talked about frequently within the industry. Nevertheless, PACCAR stock didn't give up its gains after the VW denial, and many investors seem to think that a combination would give VW greater exposure to the U.S. market, as well as some potential trade advantages.

Today's big gainers show just how sensitive stocks are across the market to takeover rumors. While some worry that the market is getting ahead of itself, there's likely more room for smart combinations among high-quality stocks for investors to seek.