Gains in technology and industrial shares helped U.S. stocks rebound from a two-day fall on Thursday as investors shrugged off the prospects of more interest rate hikes this year.
Minutes of the Federal Reserve's latest meeting showed on Wednesday that the policymakers were more confident in the need to keep raising rates, with most believing inflation would perk up.
However, comments from St Louis Fed President James Bullard earlier in the day appeared to have eased some of those concerns and the benchmark 10-year U.S. Treasury yields retreated from the more than four-year highs they hit on Wednesday.
Bullard told CNBC on Thursday that central bankers need to be careful not to increase interest rates too quickly this year because that could slow the economy too much.
Wall Street's fear gauge, the CBOE Volatility index, was at 18.58. The index had jumped above 21 points after the release of minutes.
"Yesterday was overdone. Clearly we have a major market reversal and today investors are more comfortable with the likelihood of three rate hikes and not four," said John Lynch, chief investment strategist at LPL Financial in Charlotte, North Carolina.
Despite Fed's hawkish views, bets on the U.S. short-term interest rate futures continued to reflect expectations of three rate hikes this year, based on a Reuters analysis.
Traders also gave a 94 percent chance that the first hike would come in March.
"In spite of what we experienced with a return to volatility a couple of weeks ago, we can still see firming economic and profit growth and that is something investors will need to maintain their focus on," Lynch said.
Economic data showed U.S. jobless claims fell more than expected to a near 45-year low last week.
By 11:04 a.m. ET, the Dow Jones Industrial Average had gained 1.02 percent to 25,050.5, driven by gains in United Technologies, Boeing and 3M.
United Technologies rose 3.2 percent after its chief executive said the company was exploring a breakup of its business portfolio.
The S&P 500 was up 0.75 percent at 2,721.61 and the Nasdaq Composite rose 0.64 percent to 7,264.69. Both the indexes benefited from gains in Amazon, Apple, Microsoft and Facebook.
All the 11 major S&P sectors were higher, led by a more than 2 percent rise in the energy index.
Oil prices jumped more than 1 percent after data showed surprise build in inventories.
Chesapeake Energy was the top gainer on the index, jumping 19 percent, after the company reported upbeat quarterly profit.
Pandora Media fell 7.6 percent after multiple brokerages slashed their price targets on the internet radio company's stock following results.
Advancing issues outnumbered decliners on the NYSE by 1,949 to 803. On the Nasdaq, 1,558 issues rose and 1,158 fell.