US Markets Bounce Back From Italian Woes

Wall Street has closed higher as investors took a more optimistic stance on the Italian political crisis that had earlier sent them fleeing.

The Dow Jones and S&P 500 both gained 1.3 percent to 24,667 and 2,724, while the Nasdaq rose 0.9 percent to 7,462.

The crisis in Italy continues to hover though, with anti-establishment leader Luigi Di Maio seeking to resurrect a populist coalition that collapsed at the weekend by offering the president a compromise over a controversial pick for economy minister.

In any case, investors adopted a more benign view of the situation, bidding up bank shares that tumbled in Tuesday's session on what-ifs that included a eurozone implosion or widespread defaults.

"Yesterday was a bit overdone," said Nathan Thooft of Manulife Asset Management. "The reality is that the Italian political dynamics aren't going to be solved any time soon. The market today is realising we don't really know what the outcomes are going to be but we are not going to bet on the worst-case scenario."

US economic data was fairly positive if not stellar: the government estimated first-quarter growth at 2.2 percent, a bit below the prior estimate.

And the private sector added 178,000 jobs in May, slightly below expectations in a report that comes ahead of the more closely-watched US jobs report on Friday.

A Federal Reserve "beige book" report described US firms as largely upbeat despite trade uncertainties and growing labour shortages. (AFP)