Street gained as US Federal Reserve officials stepped up their backpedalling to reassure investors that the central bank's bond-buying program is not about to disappear into the night.
Federal Reserve Bank of New York president William Dudley reminded investors that the economic outlook, not the calendar, will dictate decisions on monetary policy, including the pace of asset purchases.
"Economic circumstances could diverge significantly from the FOMC's expectations" Mr Dudley said in a speech in New York. "If labour market conditions and the economy's growth momentum were to be less favourable than in the FOMC's outlook – and this is what has happened in recent years – I would expect that the asset purchases would continue at a higher pace for longer."
In late afternoon trading in New York, the Dow Jones Industrial Average climbed 0.86 percent, the Standard & Poor's 500 Index added 0.71 percent and the Nasdaq Composite Index rose 0.81 percent.
"I am sure many of you have been closely watching the Federal Reserve's recent moves and the financial markets' reactions to those moves," Atlanta Fed president Dennis Lockhart said in a separate speech in Marietta, Georgia.
"Maybe you've felt emotions similar to those I had 50 years ago when I thought I was seeing my allowance dissipate."
"To sum up the outlook, as I see it, growth will accelerate slightly from its current moderate pace, inflation will rise gradually toward 2 percent, and unemployment will decline steadily at a modest pace," Mr Lockhart said.
"To realise this forecast or something close to it, monetary policy, which is 'highly accommodative' (in central banker speak), will have to remain so for quite some time."
The backpedalling is having an impact with stock prices steadying and bond yields, too. The yield on the US 10-year Treasury note fell back below the 2.5 percent mark.
The latest reports on the US economy were decent, though did not show enough strength to suggest the Fed will begin tapering soon.
"It's still a picture of better growth, but there is little to suggest that we are going to get the kind of break-out growth that would entail a tighter environment from policymakers in the near future," Brian Levitt, an economist at OppenheimerFunds in New York, told Reuters.
Consumer spending rose 0.3 percent in May while incomes gained 0.5 percent, the largest increase since February.
Initial claims for unemployment benefits declined 9000 last week to a seasonally adjusted 346,000, according to Labor Department data. A four-week moving average fell 2750 to 345,750.
The National Association of Realtors' Pending Home Sales Index, based on contracts signed in May, climbed 6.7 percent to 112.3, the highest level since December 2006
The latest US Treasury auction – $US29 billion in seven-year bonds – benefited from Fed efforts to dampen expectations a paring back of its bond buying was imminent.
"People probably feel like the Fed has had some success in persuading the market that they may have over-reacted to the comments made last week by [Fed chief Ben] Bernanke," David Coard, head of fixed-income trading in New York at Williams Capital Group, told Bloomberg News.
In Europe, the benchmark Stoxx 600 Index closed with a 0.7 percent increase from the previous close. Germany's DAX rose 0.6 percent, France's CAC 40 added 1 percent and the UK's FTSE 100 closed 1.3 percent higher.
Meanwhile, gold got pummeled again, sliding more than 2 percent to below $US1200 per ounce for the first time in nearly three years.