U.S. stocks rebounded Wednesday as financial stocks rebounded from steep losses in the prior session and Italian credit fears eased.
The Dow Jones industrial average rose 306.33 points — or 1.26 percent — to close at 24,667.78. Boeing, Chevron and Home Depot led the blue-chip stocks higher.
The added 1.27 percent to finish at 2,724.01 as a rise in U.S. interest rates ushered financial stocks higher and a rise in oil prices provided relief to a recently battered energy sector.
The Nasdaq composite rose nearly 0.9 percent amid gains in Facebook, Intel and Nvidia. Microsoft closed at an all-time high at $98.95 per share, north of its initial public offering price back in 1986.
The Russell 2000 added 1.5 percent to finish at 1,647.99, a record for the small-cap stock index.
The comeback in equities came as European markets stabilized on Wednesday. The Stoxx Europe 600 closed up 0.2 percent, while Italy's FTSE MIB — which fell 2.5 percent on Tuesday — rallied 2 percent.
The euro, meanwhile, recovered much of its previous losses with a 1.1 percent climb against the greenback to $1.166. Italian bond yields, which spiked Tuesday amid the political turbulence, fell across the board Wednesday after a regular bond auction proved better than feared.
Italian two-year bond yields fell to 1.72 percent from 2.1 percent, wiping out much of Tuesday's climb, while safe haven U.S. Treasury bond yields rose as investors grew more confident in the international debt market.
Though far from its highs above 3 percent in recent weeks, the yield on the benchmark 10-year Treasury note rose 7 basis points on Wednesday to 2.84 percent. The uptick in rates appeared to push the big banks upward, with Goldman Sachs, J.P. Morgan, Citigroup, Morgan Stanley, Bank of America and Wells Fargo all closing up more than 1 percent.
"I think there's certainly potential for problems [in Italy], but there's nothing necessarily new here ... the odds of Italy leaving the EU are very remote," said Bruce Bittles, chief investment strategist at Baird. "What we're seeing this year is a consolidation of what took place in 2017, when the market virtually went straight up."
Persistent uptrends and market calm "causes investors to get complacent," Bittles added. "This is a typical year in the market, especially ahead of midterms."
In the prior session, the Dow Jones industrial average fell 391.64 points — or 1.58 percent — after Italy's president over the weekend appointed former International Monetary Fund official Carlo Cottarelli as interim prime minister to help restore political order amid a swell in populist sentiment.
Crude oil futures settled higher Wednesday, with West Texas Intermediate (WTI) up $1.48, or 2.22 percent. The move upward was sparked by a report that Saudi Arabia and other OPEC states aim to stick to a global pact on cutting oil supplies until the end of 2018.
The Energy Select Sector SPDR exchange-traded fund rose 3 percent, its best day since April 10.
"We still see the path higher," said Lori Calvasina, head of U.S. equity strategy at RBC Capital Markets. "I do think the elections are an overhang, I think Washington is an overhang. I think once you get past that, I think some of those hurdles and some of things that are making people a bit more nervous will fade into the background."
On Wall Street, shares of Target rallied 2.4 percent after Bank of America designated the retailer as one of its top investing ideas.
"We believe the company should benefit from the discount store cycle … given our view that Target's efforts to turn around its U.S. business should accelerate in 2018 and result in market share gains longer-term," analyst Robert Ohmes said in a note to clients Wednesday.
Meanwhile, shares of Dick's Sporting Goods jumped 25 percent Wednesday after it beat first-quarter expectations and boosted its earnings forecast. The move was Dick's largest one-day surge.
Hiring decelerated in May, with private companies adding 178,000 positions even amid other signs of a tightening jobs market, according to a report Wednesday from ADP and Moody's Analytics.
The number missed expectations of economists surveyed by Reuters who had forecast 190,000. Moody's Analytics and ADP also revised its April number downward to 163,000, a decline of 41,000 from the original 204,000.
Chinese trade negotiations also captured Wall Street's attention Wednesday. The White House's Tuesday decision to continue to pursue action on some $50 billion worth of Chinese goods could stall talks with Beijing, according to a report from The Wall Street Journal, citing sources.
Sources told the Journal that while a U.S. advance team landed in Beijing Wednesday to prepare for Commerce Secretary Wilbur Ross's arrival later in the week, the Trump administration's pursuit of $50 billion in taxes could jeopardize the meeting altogether.
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Correction: This article has been updated to reflect that Italian President Sergio Mattarella appointed former International Monetary Fund official Carlo Cottarelli as interim prime minister.