U.S. weekly jobless benefits claims fell to a five-month low while revised data showed second-quarter GDP grew slightly more than expected.

The jobs figures assuaged some investor fears that the economy was headed for recession.

Germany's parliament overwhelmingly approved the plan agreed in July to expand the euro zone's bailout fund, averting immediate disaster, though hurdles still remain to solving the region's debt problems.

"The vote in Germany is obviously positive news and is exactly what is needed to give the region the go-ahead to recapitalize their banks," said Deirdre Dennehy, portfolio manager at the Rockland, Massachusetts-based Rockland Trust.

"Liquidity is the main problem there, and this will provide for more liquidity."

Wall Street stocks had given back early gains and dropped sharply, but rallied into the close with volume spiking in the last hour.

The Dow Jones industrial averagegained 143.08 points, or 1.30 percent, to 11,153.98. The Standard & Poor's 500 Index rose 9.34 points, or 0.81 percent, to 1,160.40. The Nasdaq Composite Indexfell 10.82 points, or 0.43 percent, to 2,480.76.

Earlier, the S&P 500 rose more than 2 percent before falling back about 1 percent.

An index of global equitiesrose 0.4 percent and U.S. dollar-denominated Nikkei futuresgained more than 2 percent.

Volatility is likely to remain high as markets react to European headlines and try to gauge the commitment of governments and institutions as they work to prevent a Greek debt default that could translate into a global economic slowdown.

A rebalancing of portfolio holdings as the third quarter draws to a close could also keep markets volatile Friday.

Markets will shift their focus Friday to talks between the European Union, the IMF, the ECB and Greece, as well as a rescue fund vote in Austria.

The eurorose 0.4 percent to around $1.3583, paring its earlier gains as the New York close drew near.

"The impetus from the German vote has waned, leaving the euro no choice but to come off its highs," said Joseph Trevisani, chief market analyst at FX Solutions in Saddle River, New Jersey.

Despite the latest bounce, the euro has lost more than 5.5 percent against the dollar this month, hammered by mounting worries over the prospect of a Greek default and bickering among policy-makers.

The New Zealand dollar fell against the U.S. dollar after ratings agency Fitch cut New Zealand's credit rating by one notch to AA, citing the country's inability to reduce its current account deficit in the next few years.

The kiwi, which also traded choppily, pared losses against the greenback and was last down 0.37 percent at $0.7706.

U.S. crude futures jumped 2.3 percent, boosted by the U.S. data, but copper prices continued to fall, adding a 1.1 percent drop to the more than 20 percent rout so far this month.