Wall Street's main indexes opened higher on Wednesday amid optimism over China's easing of pandemic restrictions.
Beijing began easing strict Covid-19 restrictions this month in compliance with the latest measures and on Monday announced it would drop its quarantine rules for tourists from next month.
The market was initially optimistic about the move in the hope that it would spur the recovery of China's economy hit by Covid-19 but the surge in infections has raised new concerns.
"What people underestimate is the fact that the world's second-largest economy is now reopening and all that economic activity will benefit the U.S.," said Thomas Hayes, chairman at Great Hill Capital LLC in New York.
As markets enter the final stages of a grueling year for equities after being dragged down by recession fears from the Federal Reserve's fastest rate hike since the early 1980s, the focus has turned to 2023 and the outlook for corporate earnings.
The benchmark S&P 500 is down nearly 20% year to date and is set for its biggest annual loss since the financial crisis of 2008. The fall was worse for the tech-heavy Nasdaq Composite, down nearly 34% for the same period.
Both indices ended lower on Tuesday at the start of the week following the year-end holiday. At the same time, investors are gripped by investor concerns about how long the Fed will continue to raise interest rates to tame high prices.
While recent data showing easing inflationary pressures have bolstered hopes of smaller rate hikes, the tight labor market and resilient American economy have fueled concerns that rates could remain higher for longer.
Markets are now pricing in a 69% chance of a 25 basis point rate hike at the U.S. central bank meeting. in February and sees the rate peaking at 4.94% in the first half of next year.
