Wall St. rebounds after Chinese stocks stem slide

(Updated 1:07AM ET)

By Tanya Agrawal

(Reuters) - U.S. stocks were higher in early afternoon on Thursday as Beijing's efforts to halt a rout in Chinese stocks lifted markets around the world.

U.S. stocks had fallen sharply on Wednesday as market turmoil in China, a rout in commodity prices, the Greek crisis and a major outage on the New York Stock Exchange spooked investors.

While the NYSE resumed operations late in the trading day on Wednesday, all eyes were on the exchange to see if its systems would withstand heavy opening trade volumes.

"NYSE open for trading, business as usual," the exchange tweeted shortly after the opening bell.

The exchange, which accounted for about 13.4 percent of U.S. stocks last month, said the halt was due to a glitch during the rollout of a new software before trading began on Wednesday.

Boosting investor sentiment, minutes from the U.S Federal Reserve's June meeting indicated that the central bank needed to see more signs of a strengthening economy before raising rates.

Investors will look for further clues when Fed Chair Janet Yellen holds a press conference on Friday.

A hike in interest rates increases the cost of borrowing, crimping corporate profit margins. The Fed has kept interest rates near zero since the 2008 financial crisis.

"We're seeing some selling fatigue because the fall in the past few days has been quite indiscriminate," said Jack Ablin, chief investment officer at BMO Private Bank in Chicago.

"The Chinese market is pretty isolated and for all intents and purposes is a domestic casino."

China's securities regulator, in its most drastic step yet to arrest a selloff on Chinese stock markets, banned shareholders with large stakes in listed firms from selling for the next six months.

About 30 percent has been knocked off the value of Chinese shares since mid-June. Some investors fear that the turmoil in the Chinese market could destabilize the global financial system, making it a bigger risk than the Greek crisis.

At 12:37 p.m. ET the Dow Jones industrial average was up 115.35 points, or 0.66 percent, at 17,630.77, the S&P 500 was up 13.5 points, or 0.66 percent, at 2,060.18 and the Nasdaq Composite was up 44.09 points, or 0.9 percent, at 4,953.85.

Eight of the 10 major S&P 500 sectors were higher, with the health index leading the gainers with a 0.88 percent rise.

In U.S. data, new applications for unemployment benefits rose last week to their highest rate since February.

European markets rose on hopes that Greece might be able to win a deal that could keep it in the euro zone. Greek Prime Minister Alexis Tsipras has until midnight to propose spending-cut plans.

U.S. quarterly earnings season kicked off with Alcoa's (NYSE: AA) quarterly results on Wednesday. The company's profit missed expectations due to plunging aluminum prices. The major U.S. banks are scheduled to report next week.

Coty's (NYSE: COTY) shares fell 5.7 percent to $29.71 after Procter & Gamble (NYSE: PG) agreed to sell its beauty business to the company in a deal that values the business at $12.5 billion. P&G shares were down marginally at $80.87.

Walgreens Boots Alliance (NYSE: WAB) was up 4.9 percent at $90.17 after the largest U.S. drug store chain raised its full-year profit forecast.

Advancing issues outnumbered decliners on the NYSE by 2,117 to 869. On the Nasdaq, 1,990 issues rose and 708 fell.

The S&P 500 index showed nine new 52-week highs and five new lows, while the Nasdaq recorded 31 new highs and 43 new lows.

(Reporting by Tanya Agrawal; Editing by Ted Kerr and Saumyadeb Chakrabarty)

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