1:45pm EST
U.S. stocks more than halved gains on Thursday as optimism faded after an opening rebound on the jump in Chinese stocks overnight.
“It’s an underlying sense that the market is getting weaker, not stronger,” said Adam Sarhan, CEO of Sarhan Capital. “The market’s been drifting lower ever since the open. (There’s a) lack of a bullish catalyst.”
The Dow Jones industrial average traded about 70 points higher after surging as much as 249 points in the open as the major averages briefly jumped nearly 1 percent or more.
The Nasdaq outperformed as the iShares Nasdaq Biotechnology ETF (IBB) temporarily gained more than 1.5 percent.
“I think we’ve got two things that have been weighing on the market in the last several sessions that have turned around,” said David Schiegoleit, managing director of investments for The Private Client Reserve of U.S. Bank. “Not only did we have a nice rally in China overnight (but we have) moderately positive comments from European leaders (on Greece).”
Germany’s Finance Minister Wolfgang Schaeuble conceded on Thursday that Greece would need some debt restructuring as part of any new loan program to make its economy viable, Reuters reported. The cash-strapped government is expected to submit proposals by midnight Thursday.
The Shanghai Composite shot 5.8 percent higher on Thursday for its best day in six years after China instituted new supportive measures, including restrictions on short selling and loosening of margin lending regulations.
“I don’t think we should have the same causal relationship but at least for today in a market that’s oversold, having a bounce in Asian markets is going to” give us a bounce in the U.S.,” said Art Hogan, chief market strategist at Wunderlich Securities.
Read More Reform proposal in ‘next few hours’: Greek official
“You had that morning rush, and you want that type of spike (right) off the gate. That means you have more of those spikes from short sellers covering,” said Peter Cardillo, chief market economist at Rockwell Global Capital. “Unless we get some real news—Greece proposals not sufficient to get emergency loans—we’ll probably rebound towards the higher end of today’s trading range.”
The S&P 500 swung back into positive territory for the year, with the Dow about half a percent lower for 2015.
“We’re off to a decent start (in earnings) but it’s a little down from the first quarter,” said Nick Raich, CEO of The Earnings Scout. “But the focus overseas is still driving markets. Policy makers are doing everything they can to prevent selloff in China.”
European stocks also surged, with the DAX up more than 2.5 percent, as investors remained hopeful of a Greece proposal before the Friday deadline.
Political talks over Greece must produce a strong outcome on Sunday for the European Central Bank to provide continued support, while there’s only “very low” leeway to reprofile Greece’s debt, euro zone leaders said, according to Reuters.
Athens on Wednesday formally applied for a three-year loan, with the government expected later on Thursday to present new reform proposals for further aid. Euro zone finance ministers will meet this weekend to discuss the reforms.
U.S. stocks closed lower by nearly 1.5 percent or more on Wednesday, with the S&P and Dow below their 200-day moving averages, as continued concerns about Greece and the extended selloff in the Chinese market weighed on investor sentiment.
Floor trading on the New York Stock Exchange was suspended for more than 3.5-hours due to a technical glitch.
“Some worries around the NYSE shut-down. Obviously that passed as well,” said Bill Stone, chief investment strategist at PNC Asset Management. I’m “not sure that the Chinese worry has passed as well.”
Read MoreNYSE: This is why we halted floor trading
He said on Wednesday the S&P 500 came close enough to his 1-month forecast of 2,038 and is now oversold, setting up for a short-term bounce.
On the domestic front, weekly jobless claims gained slightly to 297,000, the highest level since February.
There are several Federal Reserve speakers on the calendar ahead of Fed Chair Janet Yellen’s speech Friday.
Fed Governor Lael Brainard said in a Reuters report the eight most important U.S. financial institutions may still cast too large of a shadow over the banking system. She added that sudden spikes in market volatility and developments in China are also areas of focus.
Separately, Kansas City Fed Bank President Esther George said in a Reuters report the Federal Reserve may stumble into a “trap” if it continues waiting for more data to justify an initial interest rate increase, risking a quick takeoff of inflation or other problems.
Earnings are also in focus, with PepsiCo and Walgreens Boots Allianceposting results before the bell.
Walgreens Boots Alliance earned an adjusted $1.02 per share for its latest quarter, 15 cents above estimates, though revenue was shy of forecasts. The drug store operator also raised its full-year earnings forecast, and increased its quarterly dividend by 6.7 percent to 36 cents per share.
Read MoreEarly movers: PEP, AA, WBA, AVP, LB, AZN, MA & more
Bond yields rose, with the 10-year yield at 2.27 percent and the 30-year yield at 3.06 percent. The U.S. Treasury auctioned $13 billion 30-year bond auction at a high yield of 3.084 percent.
The U.S. dollar traded higher, with the euro dipping below $1.10.
The Dow Jones Industrial Average traded up 125 points, or 0.72 percent, at 17,641, with Microsoft leading nearly all blue-chips higher and Intel the only decliner.
The S&P 500 traded up 15 points, or 0.71 percent, at 2,061, with financials leading eight sectors higher and utilities and telecommunications the only decliners.
The Nasdaq traded up 45 points, or 0.92 percent, at 4,955.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 18.
About two stocks advanced for every decliner in the New York Stock Exchange, with an exchange volume of 362 million and a composite volume of 1.7 billion in early afternoon trade.
Crude oil futures for August delivery gained $1.39 to $53.04 a barrel on the New York Mercantile Exchange. Gold futures fell $3.50 to $1,160.00 an ounce as of 12:57 p.m.
Source: http://www.cnbc.com/id/102821200