U.S. stocks bounced on Wednesday, closing up more than 1 percent amid signs of encouraging developments in the Greece debt talks and better economic growth as yields continued to rally. (Tweet This)
All blue chips gained and all S&P sectors advanced as the major averages recovered from recent losses.
"It's really been Greece. There was a real sense they're just going to let it go, and now we're at the 11th hour and now it looks like a deal is going to come together at the last minute," said Alan Skrainka, chief investment officer at Cornerstone Wealth Management.
The Dow Jones industrial average briefly extended gains to trade 280 points higher as traders cheered a Bloomberg report that Germany is said to consider offering Greek Prime Minister Alexis Tsipras aid in return for committing to one economic reform, sources familiar with Germany's position told the news service. CNBC was unable to confirm this report.
In response, a government spokesman told Reuters that Germany will only accept a deal between Athens and its creditors if it has the approval of all three lending operations.
"The catalyst is Greece," Jack Ablin, chief investment officer at BMO Private Bank said, referring to the late-morning 50-point jump in the Dow. "We're seeing Europe lead the equity charts higher but I also find it encouraging that equities can gain ground while interest rates are rising."
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"The fact is that the fundamental underpinnings of the market may be sound," he said. Higher bond yields raise expectations of increase rate hike, which Ablin said is preferable for both the market and investors.
Traders also noted short covering in Wednesday's broad-based stock rally, which sent the major averages up more than 1.2 percent.
Earlier, the blue chip index gained more than 200 points in morning trade to swing back into positive territory for the year, up about 1 percent for 2015. The major averages rebounded from recent lows. The Dow transports also recovered, closing up 0.7 percent as most of the airlines gained back some losses. The index remains at correction levels.
"I really believe fundamentals drive markets and fundamentals in the U.S. are coming back," said Doug Cote, chief market strategist at Voya Investment Management.