Updated at 4:01 p.m. ET: Stocks closed Thursday higher despite weak data that reflected the nation's sluggish economic growth.
Equities snapped a five-day losing streak on hopes the Chinese government would take steps to bolster the country's slowing growth, and as U.S. jobless claims fell a lot more than expected in the latest week.
Boosting stocks mid-session was news of Spain’s timetable for economic reforms. The 2013 budget had spending cuts that were harsher than expected, lifting markets and hopes for an end to the region's debt crisis.
Tension in Europe, underlined by anti-austerity measures in Madrid and Athens, has contributed to the S&P's 1.9 percent drop over the past five days. Analysts said investors may look for U.S. stocks offering value after the recent declines.
Earlier, data showed second-quarter gross domestic product growth of 1.3 percent, against expected growth of 1.7 percent. At the same time, August durable goods tumbled 13.2 percent, much more than the 5 percent drop expected.
Jobless claims dropped by 23,000 to 359,000, significantly more than the drop of 4,000 that had been expected. Pending home sales will be released later on Thursday.
In China, stocks rebounded from multi-year lows on speculation the China Securities Regulatory Commission would announce steps to support beleaguered domestic markets which could include changes to the initial public offering market. Traders said China's central bank fed $57.9 billion into money markets this week, the largest weekly injection in history.
China's securities regulator will hold a regular meeting on Thursday, but reforming the system for initial public offers is not on the agenda, a regulatory source told Reuters.
U.S. cyclical sectors, which have sold off in recent sessions, will likely benefit from any measure to boost Chinese growth. Material and energy shares should be particularly strong as they are tied to demand forecasts.
The world economy has been relying on China's growth to make up for weakness in the United States and Europe. While the U.S. has shown signs of recovery and the Federal Reserve recently announced measures to support markets, slowing growth in China has been a concern, especially with Europe's debt crisis still in focus.
"I wouldn't be surprised to see China's central banks jump on the easing bandwagon with growth easing there, but we need to see if it will be a concerted push to force the market's growth into a stronger gear, or more of a symbolic gesture," said Adam Sarhan, chief executive of Sarhan Capital in New York.
In company news, Tempur-Pedic International Inc agreed to buy rival mattress maker Sealy Corp for about $242 million and assume about $750 million in debt.
The S&P 500 fell for a fifth straight trading day on Wednesday as the protests in Europe raised fresh concerns over the region's ability to get its debt crisis under control.
Reuters contributed to this report.