Stocks ended the session on a high note, led by energy, tech and financials. The Dow gained more than 250 points while other major averages also finished strongly.
Investors grew reassured that China wasn't about to reignite fears about European debt and bargain-hunters swooped in.
Utilities and consumer staples underperformed, though all 10 S&P sectors rose at least 1 percent. The Nasdaq gained more than 3 percent.
Separate economic reports showed the employment recovery remains lacklusterand first-quarter growth was a bit slower than originally thought. That helped temper sentiment somewhat but wasn't enough to keep away the bargain hunters.
The market fell in whipsaw trading Wednesday, with a late-session drop attributed to ultimately unfounded reports that China was going to put its European assets under review.
With global stormclouds starting to pull back at least for the moment, investors instead focused Thursday on good news.
"The drubbing stocks and commodities have sustained since April 23 was enough for the time being, or at least until there's greater clarity as to what the real cost of the euro zone fiscal and debt makeover will be," John Stoltzfus, chief strategist at Ticonderoga Securities in New York, wrote in his morning note. "For now, we're expecting the rally to gain support until further structural problems surface and force investors once again to ponder threats to global growth."
Retail was among the big gainers for the day as a handful of earnings reports showed a resilient consumer.
Warehouse club Costco reported a jump in quarterly profit that equated to 68 cents a share as sales picked up at the big-box retailer.
More positive earnings news came from high-end jeweler Tiffany, which reported earnings more than doubled over the past year. The company also raised its outlook, sending shares up.
Retail stocks generally were among the market leaders. The SPDRS&P Retail exchange-traded gained more than 3 percent.
And Microsoft rebounded a day after news that the software giant had lost its top spot in tech market cap to Apple .
Yet the market's behavior during May has settled into a familiar pattern, with early moves holding sway for most of the day then the last hour taking on a life of its own.
There remained concern that the correction had not yet run its course.
"Enough correction has occurred. I just don't feel like we've tested it over a sufficient period of time," said Linda Duessel, equity market strategist at Federated Investors in Pittsburgh. "Even if we're up 2 percent today, people are just covering shorts. That's not even a good enough excuse for the rally today."
All but one of the 30 Dow components were positive, with Alcoa and Intel and Intel leading the pack.
Oil extended its rally past $74 per barrel, but the dollar fell nearly 1 percent against a basket of foreign currencies and gold backed off a shade to near $1,210 an ounce.
Three-month Libor lending rates, watched closely as they reflect global credit pressures, inched higher to rise for the 12th straight day.
BP shares jumped after it announced Wednesday its latest experimental technique to stop oil gushing from a well in the Gulf of Mexico, called “top kill.” BP will force-feed a heavy, mud-like substance into the well, which is submerged 5,000 feet underwater, and is expected to find out if the move is a success Thursday.
The surge in markets took the lustre off Treasurys, sending prices down more than two points on the 30-year bond and more than a point on the benchmark 10-year note, which was last yielding 3.33 percent, its highest in a week. A largely successful 7-year note auction did little to stem the selloff in government debt.
Citigroup gained as the government began liquidating its position in the banking giant. The move also comes as hedge fund manager Bill Ackman said he plunked down $150 million for Citi shares.
The retail story continued: Jo-Ann Stores shares spiked after the company reported its earnings also doubled.
Volatility took a fast fade as well, with the CBOEVolatility Index heading back towards 30. The VIX showed a similar drop Wednesday then violently rebounded at the end of the session.
Monsanto was one of the dark spots on the market, as the fertilizer company cut its guidance, leading S&P to reduce its rating on the company to "hold" from "buy."
Market breadth was strongly positive, with gainers beating losers 12 to 1, even though New York Stock Exchange volume was an unspectacular 927 million shares approaching the final half-hour of trading.