The Dow Jones Industrial Average traded 205 points higher, or 0.8%. The S&P 500 gained 0.9% while the Nasdaq Composite advanced 1.1%.
Wednesday’s gains come after the major indexes posted solid losses in the previous session. The Dow dropped 285 points on Tuesday while the Nasdaq and S&P 500 slid 1.1% and 0.7%, respectively.
Caterpillar shares gained 1.3% while Micron Technology advanced nearly 5% after a price-target increase at Mizuho Securities. Intel was the best-performing stock in the Dow, rising nearly 3%.
Bank stocks also got a boost as the U.S. yield curve uninverted, with the 10-year rate trading above its 2-year counterpart. Bank of America and Citigroup gained more than 1% each while J.P. Morgan Chase advanced 1.1%.
Hong Kong leader Carrie Lam said that she will withdraw a contentious extradition bill that has sparked months of mass protests. The Hang Seng index in Hong Kong soared around 4% on reports overnight that the withdrawal of the bill was imminent. The iShares MSCI Hong Kong ETF (EWH) gained 4.4% and was on pace for its biggest one-day rise since Sept. 8, 2015 when it rose 5.4%.
The bill’s withdrawal is seen as a positive because protest escalation was seen as a potential disruptor to the global economy. Some investors feared the protests could hinder U.S.-China trade talks.
“While the initial response to Lam’s speech was a thumbs down, with the main dispute taken off the table things should calm down,” said Peter Boockvar, chief investment officer at Bleakley Advisory Group. “The big picture issues though remain between the two and will only intensify further in coming years as we approach the 2047 handover but for now, move on.”
Earlier Wednesday, a report showed growth in China’s services sector had expanded at its fastest rate in three months in August, despite broader economic headwinds.
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“This is an easing of economic woes in China,” said Peter Cardillo, chief market economist at Spartan Capital Securities. This is “triggering a relief rally after yesterday’s declines.”
At the start of the month, the U.S. and China imposed new tariffs on one another’s goods. It marked the latest escalation in a long-running trade war between the world’s two largest economies.
Sentiment also got a boost after New York Federal Reserve President John Williams said in a speech the central bank will act as appropriate to sustain the current economic expansion. He added that low inflation is “is indeed the problem of this era ” and that it is “a reflection of the broader economic picture.”
It prompted the new prime minister to announce he would immediately push for a snap election.
Sterling has since pared some of its recent losses against the U.S. dollar. The U.K. currency gained 0.9% to climb above $1.21 Wednesday, after falling to its lowest level since October 2016 in the previous session.
—CNBC’s Sam Meredith contributed to this report.