The blue-chip Dow Jones Industrial Average was down 300 points during the day, but shot up by 6.7 per cent to close 552 points higher.
The Nasdaq vaulted 6.5 per cent and the broad S&P500 index climbed 6.9 per cent to close at 911.29.
The market swung wildly but rallied late in the day as investors looked for bargains after three days of steep losses.
More bleak economic and corporate news from the US and Europe failed to stop the buying as investors hoped the market had finally bottomed out.
Paul Nolte, analyst at Hinsdale Investments, said brokers thought they had spied bargains.
"We got down 300 points (for the Dow) which was a retest of the lows in early and late October, and as the markets bounced off that you heard traders starting to cheer and then the market just took a life of its own,'' he said.
"They believed that the bottom is in.''
However Mr Nolte is expects more market falls ahead, like after the big rallies of the past few weeks.
On the economic front, the US trade deficit fell 4.4 per cent to $US56.5 billion ($88.6 billion) in September.
That would usually be a positive, except the new data showed steep falls in imports and exports as consumers snap shut their wallets.
The number of US job-seekers registering for the dole also jumped to to 516,000, well above the 400,000 mark that usually signals recession.
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