Nasdaq sets record, Dow up triple digits as stocks rebound; Greece eyed

U.S. stocks closed higher on Wednesday, recovering from Tuesday's selloff, as encouraging Greece headlines boosted investor sentiment amid a slight pause in the dollar and yield climb. ( Tweet This )

There's "some positive feeling (on) rumors that Greece may be reaching a deal," said Robert Pavlik, chief market strategist at Boston Private Wealth. "It's a snapback from yesterday's selling (and) less concern about an interest rate hike. … I thought yesterday was a little bit extreme."

The Nasdaq jumped nearly 1.5 percent to end above its previous closing high of 5,092.09. The index lost 1.1 percent on Tuesday. Apple and the iShares Nasdaq Biotechnology ETF (IBB) each gained about 1.9 percent.

Semiconductors performed well, with the Market Vector Semiconductors (SMH) up 3.7 percent for its best day since October 31.

Broadcom surged nearly 22 percent for its best day since April 10, 2001, after Dow Jones reported the chip company was in talks to be bought by peer Avago Technologies.

Katie Stockton, technical strategist at BTIG, said the Nasdaq composite is "overbought from a short-term perspective," noting minor resistance at the April intraday high of 5119.83.

"Short-term momentum faltered with yesterday's pick-up in volatility, so a pullback looks likely into month-end," she said.

The Dow Jones industrial average closed up about 120 points. The blue chip index fell as much as 242 points on Tuesday before closing 190 points lower.

5-day performance

"Improved sentiment in Europe is providing a boost to U.S. equities," said John Lonski, chief economist at Moody's.

European stocks opened higher and rallied on initially encouraging reports out of Greece. The German DAX closed up more than 1 percent, while Greece's ATHEX Composite ended 3.5 percent higher.

"That would lessen the perceived risk surrounding the Greek's ability to make good on its debt payment obligations," Lonski said.

News out of the ongoing debt talks were mixed. Greek Prime Minister Alexis Tsipras said on Wednesday the negotiations are on the "final stretch" towards a positive deal, Reuters reported. A European official said in a Bloomberg report that "we are still working toward an agreement" and that no accord was reached.

Separately, the European Central Bank left the ceiling on emergency funding for Greek banks unchanged for the first time since February, Reuters said.

Later in the day, German Finance Minister Wolfgang Schaeuble said there was not much progress in the Greek debt talks and he was surprised by the upbeat tone from some Greek government officials, according to an ARD television interview cited by Reuters.

The dollar gave back early gains to trade mildly higher, with the euro trading near $1.09. The yen remained near 8-year highs against the greenback.

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Marc Chandler, foreign exchange strategist at Brown Brothers Harriman, said the dollar moved on Greek headlines but he is still suspicious that much progress was made.

Athens must make a 300 million euro payment to the International Monetary Fund on June 5, ahead of several other payments due to the IMF later in the month, for a total of 1.6 billion euros.

Treasury yields pared gains in late trade, with the 2-year at 0.65 percent after rising as high as 0.67 percent. The 10-year yield was 2.13 after touching 2.17 percent. The Treasury Department auctioned $35 billion of 5-year notes at a high yield of 1.560 percent, the highest year-to-date.

"I think the market is going to catch its breath after yesterday's tumble. The focus remains on the dollar and the yield curve," said Peter Cardillo, chief market economist at Rockwell Global Capital.

No major data was expected Wednesday. Weekly mortgage applications dropped 1.6 percent as higher rates put a pause on refinancing.

Investors kept an eye on the Dow transports, which recovered to close up 1.1 percent. On Tuesday, the index extended its recent selloff with its 50-day moving average falling below its 200-day moving average.

Read MoreDollar and bond yields to dominate trading

'There's "nothing that suggests a correction in the transports is over and eventually the broader market will get hit," Cardillo said. " I think June is going to be a bit different from May—a tough month for stocks."

The CBOE Volatility Index (.VIX), considered the best gauge of fear in the market, fell to trade near 13. The index jumped 16.2 percent on Tuesday for its best daily move since January 28.

"The VIX was near year-to-date lows. When that happens, it becomes very skittish and very sensitive to any negative move," said Randy Frederick, managing director of trading and derivatives at Charles Schwab.

Stocks closed down more than 1 percent on Tuesday as investors weighed a strong dollar and mixed economic data that indicated the Fed could tighten sooner rather than later.

"This is the least-trusted bull market. At the first sign of weakness you see lots of people exit," said Adam Sarhan, CEO of Sarhan Capital.

"If we open higher and close lower, that may be a subtle indication that the market isn't ready to go higher," he said.

U.S. Treasury Secretary Jack Lew attends the G7 meeting of finance ministers in Dresden on Thursday and Friday.

Ahead of the meeting, Lew told students at the London School of Economics that European negotiators must not miscalculate as they try to negotiate a debt deal with Greece's government given uncertainty over the actual cost of a Greek exit from the euro zone.

U.S. Federal Reserve Vice Chairman Stanley Fischer said Tuesday that markets should not be surprised by the timing or pace of rate hikes.

Symbol
Name
Price
 
Change
%Change
DJIA
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S&P 500
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NASDAQ
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The Dow Jones Industrial Average closed up 121.45 points, or 0.67 percent, at 18,162.99, with Microsoft leading gains and Nike the greatest laggard.

The S&P 500 closed up 19.28 points, or 0.92 percent, at 2,123.48, with information technology leading all sectors except energy higher.

The Nasdaq closed up 73.84 points, or 1.47 percent, at 5,106.59, a closing high but below the all-time intraday high of 5,132.52 touched in March 2000.

Nearly three stocks advanced for ever decliner on the New York Stock Exchange, with an exchange volume of 672 million and a composite volume of 3.0 billion in the close.

Crude oil futures settled down 52 cents, or 0.9 percent, at $57.51 a barrel on the New York Mercantile Exchange. Gold futures ended down $1.30 at $1,185.60 an ounce.

Earnings out before the open on Wednesday included Michael Kors, Costco, Tiffany, Toll Brothers, and Movado.

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Tiffany earned 81 cents per share for its latest quarter, 11 cents above estimates, and revenue was also well above forecasts despite the negative effects of a strong dollar. The results followed Tiffany's downbeat forecast from earlier this year.

Michael Kors fell one cent shy of estimates with quarterly profit of 90 cents per share, with revenue essentially in line. The company, however, reported its slowest sales growth in 3-1/2 years, and its full-year forecast was below Street estimates.

Toll Brothers earned 37 cents per share for its latest quarter, two cents above estimates. The luxury home builder did see revenue come in below estimates as the number of homes sold fell two percent.

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DSW reported quarterly profit of 53 cents per share, six cents above estimates, and revenue also above analyst forecasts. The company's results were led by a jump in athletic footwear sales, though it did see growth in all its major categories.

CNBC's Patti Domm and Peter Schacknow contributed to this report.

On tap this week:

Thursday

2:20 a.m.: San Francisco Fed President John Williams in Singapore

8:30 a.m.: Initial claims

10 a.m.: Pending home sales

1 p.m.: $29 billion 7-year note auction

2:45 p.m.: Minnesota Fed President Narayana Kocherlakota

Friday

8:30 a.m.: Real GDP Q1 (second)

9:45 a.m.: Chicago PMI

10 a.m.: Consumer sentiment

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