The markets closed Christmas Eve down sharply, with the Dow dropping 653 points and the S&P 500 nearing a bear market. It gained 3.9%, the biggest percentage gain since August 2015.
"Investors went bargain shopping the day after Christmas, where stocks just got too cheap relative to earnings, future earnings, any reasonable assessment of earnings", said Chris Rupkey, managing director of MUFG.
Stocks rose higher despite virtually no news - which may have been a catalyst in its own right. President Donald Trump has not tweeted Wednesday.
USA stocks edged up on Wednesday, with the S&P 500 .SPX up 0.2 percent in late morning trading.
The head of the U.S. Federal Reserve faces no risk of losing his job and President Donald Trump is happy with his Treasury secretary, a White House official said in an apparent attempt to calm Wall Street nerves frayed by Trump's criticism of the Fed. Newmont Mining Corp (NEM), which fell 0.1%, was the sole loser.
Energy stocks were close behind, led by Marathon Oil (MRO), which surged 11.9% Wednesday.
Consumer product stocks also rose sharply.
Retailers were especially strong, with Amazon soaring 9.5 percent after declaring that its notched new records in holiday sales, fueled by "tens of millions" of new subscriptions or free trials of its Prime service.More news: What Is the Nickname Kate Middleton Calls Prince George and Princess Charlotte?
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Here are some of the key factors that have brought the S&P 500 to the brink of a "bear market", a drop of 20 percent from its peak.
Investors have been anxious for months about the potential impact of the US-China trade conflict on the broader economy, which poses risks to the world's two biggest economies, which are highly interdependent.
Contrary to US media reports that Trump's frustration with Mnuchin ratcheted up after the latter's failed attempt to put a brake on the free-fall of major USA stock indices leading to the Christmas holiday, the president told reporters Tuesday morning in the Oval Office that he has confidence in Mnuchin, and that the secretary is a "very talented and very smart person".
Those doubts come of top of worries about how sharply the United States economy might lose steam next year. The slightest bit of bad news can turn a rally into a rout.
In Asian markets, Japan's Nikkei swung between gains and losses Wednesday before closing up almost 1%. The Nasdaq was up about 4.8%, pulling out bear market territory. In China, the Shanghai Composite shed 0.3% on Wednesday.
"Our judgment is that the United States economy remains solid at the moment", though investors need to pay attention to the possible impact of U.S. trade rows with other countries on financial markets and business outlooks, said a report by Norio Miyagawa, senior economist at Mizuho Securities.
The turmoil in Washington is making traders in other countries fret about the stewardship of the world's biggest economy.
On Tuesday, Trump had complained that the Fed is raising interest rates too quickly, this after a precipitous 650-plus point plunge in the Dow Jones Industrial Average in a shortened pre-holiday trading session on Monday.
"There's a lot of uncertainty, and that's one of the biggest things that the market doesn't like", Andrew Sullivan, a Hong Kong-based market economist, told CNN.