Wall Street ended higher for the first time in over a week on Thursday, with the Dow and the S&P 500 rising 1 percent at one point, but many analysts saw the rebound as short-lived.
A report showing record U.S. exports in April eased some concerns about a stalled economic recovery, which had been weighing on the market.
A spike in oil prices helped lift materials and energy stocks. Investors also snapped up beaten-down stocks in the financial sector.
The S&P materials sector index <.GSPM> rose 1.6 percent and the energy index <.GSPE> gained 1.2 percent. The Morgan Stanley cyclical index <.CYC>, which is down more than 5.2 percent in June, rose 1 percent. The KBW bank index <.BKX> was up 1.2 percent.
Several economists said the spike in U.S. exports in April could prompt revisions higher of gross domestic product growth in the second quarter, interrupting a trend of lowered expectations.
But the mood remained fragile. Many analysts still expected the S&P to retest its March low of 1,250 after a string of data, including the latest payrolls report, provided little room for optimism.
Concerns about the future of equities after the Fed's $600 billion second round of stimulus expire at the end of this month also weighed on the market.
After falling for six straight days, the market was looking for an excuse to bounce back and it got it from the trade data, said Steve Blitz, senior economist at ITG in New York.
You can't take just one day and draw a conclusion that the bear market is over.
Reflecting the bearish sentiment, the daily volume put/call ratio for equity options on the Chicago Board Options Exchange (CBOE) was at an 18-month high as of Wednesday's close, according to data posted on the exchange website, indicating investors are significantly bearish on the stock market.
The Dow Jones industrial average <.DJI> was up 75.42 points, or 0.63 percent, at 12,124.36. The Standard & Poor's 500 Index <.SPX> rose 9.44 points, or 0.74 percent, at 1,289.00. The Nasdaq Composite Index <.IXIC> gained 9.49 points, or 0.35 percent, at 2,684.87.
The S&P had lost more than 6 percent in the last six days leading up to Thursday, while the Nasdaq had nearly erased its gains for the year.
CBOE data showed that put/call ratio on equity options rose to 0.99 on Wednesday, which means 99 puts traded for every 100 calls, the highest ratio since January 15, 2009. The average had been between 0.55-0.70 this year.
The high put/call ratio signals investors are actively hedging their bets and setting up for further market declines. But as in other cases, extreme bearishness could also be a contrarian indicator.
A lot of fear came into the market as investors bought puts, said Jay Shartsis, director of options trading at R.F. Lafferty & Co in New York.
(But) the high ratio identifies a good buy level for stocks. When a ratio turns this high, from a contrarian view, the risk-reward factor is now significantly skewed to the buy side, Shartsis said.
The PHLX semiconductor index <.SOX> bounced off its 200-day moving average and was holding near 410, a key level that offered strong support in March.
Texas Instruments Inc
Reflecting the appetite for tech stocks, shares of Fusion-io
But shares of China-based Taomee Holdings Ltd
As U.S. regulators, brokers and investors are sharpening their look at Chinese companies, about half the top percentage losers on the NYSE and the Nasdaq with share prices over $2 were Chinese companies.
Volume was thin on the New York Stock Exchange, NYSE Amex and Nasdaq with just 6.31 billion shares traded, compared with the daily average of 7.59 billion.
Advancers beat decliners on the NYSE by 1,904 to 1,076. On the Nasdaq, advancing stocks outnumbered declining ones by 1,599 to 1,002.
Details of Thursday's economic data showed the U.S. trade deficit narrowed unexpectedly in April as U.S. exports rose to a record and imports from Japan tumbled more than 25 percent.
A separate report showed the number of Americans filing new claims for unemployment benefits rose by 1,000 last week, while continued claims fell more than expected.
(Additional reporting by Rodrigo Campos in New York and Doris Frankel in Chicago; Editing by Jan Paschal)