Activity in China's services sector expanded at the fastest pace in three months in August, providing a boost to the world's second-largest economy that has been struggling to reverse a prolonged slump in its manufacturing sector.
The mood also got a lift after Hong Kong leader Carrie Lam withdrew an extradition bill that had triggered months of often violent protests in the Chinese-ruled city.
"This is a sentiment driven market and whenever you get news like this, while it may not directly impact the US, it causes a ripple effect," said Ryan Nauman, market
strategist at Informa Financial Intelligence in Lake Taho, California.
Markets struggled last month as escalating trade tensions and the inversion of a key part of the US yield curve, often seen as a sign of recession, drove investors away from risky assets and pushed the S&P 500 to log its worst August in four years.
A contraction in US factory activity in August and new rounds of tariffs from the Washington and Beijing only added to those concerns on Tuesday, pulling the Dow Jones Industrial Average and Nasdaq down over 1%.
However, risk sentiment improved on Wednesday, pushing the benchmark US Treasury 10-year yield higher, with the yield curve at its steepest in more than two weeks.
Technology stocks led gains among the 11 major S&P sectors with a 1.6% rise and provided the biggest boost.
At 12:55 p.m. ET, the Dow was up 211.68 points, or 0.81%, at 26,329.70 and the S&P 500 was up 26.93 points, or 0.93%, at 2,933.20.
The Nasdaq Composite was up 91.56 points, or 1.16%, at 7,965.72. Tyson Foods Inc shares fell 6.12% to the bottom of the S&P 500 after the United States' biggest meat processor cut its 2019 earnings forecast.