By Sue Chang and Anora Mahmudova, MarketWatch

U.S. stocks recovered Wednesday from an intense selloff in the previous session, but analysts say the market's upside may be limited as the strength of the rebound leaves much to be desired.

A somewhat stable trading session in China ahead of the country's long holiday weekend as well as U.S. data showing solid private-sector job gains in August and a jump in productivity growth in the second quarter helped to lure investors back to stocks.

China's stock markets are closed Thursday and Friday (http://www.marketwatch.com/story/china-to-close-stock-market-to-honor-world-war-ii-anniversary-2015-09-01) for the World War II Victory Day parade.

The S&P 500 was up 17 points, or 0.9%, to 1,931. The Dow Jones Industrial Average rose 174 points, or 1.1%, to 16,232. The Nasdaq Composite advanced 52 points, or 1.1%, to 4,688.

"The rebound feels just like some of the selling was exhausted yesterday into the bell. We have seen some funds taking hedges off on the S&P 500, but no real demand in single stocks so that is a little disconcerting," said Ian Winer, director of equity trading at Wedbush Securities.

Paul Nolte, portfolio manager at Kingsview Asset Management, attributed the recovery to heavy selling from Tuesday when the Dow and the S&P 500 suffered their third worst declines of the year (http://www.marketwatch.com/story/china-growth-fears-slam-us-stock-futures-sharply-lower-2015-09-01).

"Given the rather tame bounce, investors do not seem to have much conviction," he said.

Wednesday's data and the monthly payrolls report due Friday are among the last economic reports before the Federal Reserve makes a decision on interest rates at its Sept. 16-17 policy meeting.

"While China's slowing growth has been blamed for the correction and volatility in the stock market, it goes deeper than that. It is markets' realization that the Fed has run its course with the easing policy to avoid a depression and deflation, but now structural reforms are needed to boost the economic growth," said Michael Arone, chief investment strategist at State Street Global Advisors' US Intermediary Business.

Speaking about Friday's jobs report, Arone said it would have something for those who would like to see a rate increase in September and those who would prefer a delay.

"It is likely to be in line with consensus estimate, but will not give investors a definitive answer as to what the Fed is likely to do. Until the is clarity about the rate policy, we expect volatility to continue in the near term," Arone said.

The Shanghai Composite Index slipped 0.2% (http://www.marketwatch.com/storyno-meta-for-guid) on Wednesday, for a 2.2% weekly slide.

U.S. data: Investors are trying to gauge how the latest economic news will affect the Fed's debate on when to raise interest rates. Read: Where every Fed member stands on raising interest rates (http://www.marketwatch.com/story/where-every-fed-member-stands-on-raising-interest-rates-2015-08-28).

Private-sector employment gains continued in August at a slightly faster pace than in July. Employers added 190,000 jobs last month, Automatic Data Processing Inc. reported Wednesday.

U.S. productivity in the second quarter rose at the fastest pace since the end of 2013 (http://www.marketwatch.com/story/us-productivity-rises-at-fastest-pace-since-end-of-2013-2015-09-02). Factory orders rose 0.4% in July, marking the second month of gains after a strong June (http://www.marketwatch.com/story/factory-orders-rise-for-second-month-in-july-2015-09-02).

"Investors are interpreting the ADP data, showing 190,000 jobs as not big enough for the Fed to go ahead with the September rate hike, but solid enough to indicate there is no spillover from China's weakness into our economy," said John Canally, investment strategist and economist at LPL Financial.

"The fact there was no news from China today and markets there will be closed for the next two days also helped push U.S. stocks higher," Canally said.

The Fed's Beige Book is slated for release at 2 p.m.

Movers and shakers: Shares of H&R Block Inc. (HRB) jumped more than 7% after the company announced a new $3.5 billion stock repurchase program.

Dollar Tree Inc.(DLTR) shares fell 2%, adding to a 8.7% loss on Tuesday when the discount retailer announced it swung into a loss during the latest quarter.

After Tuesday's closing bell, AT&T Inc.(T) said TRC Capital Corp. has made an unsolicited "mini-tender" offer (http://www.marketwatch.com/story/att-recommends-shareholders-reject-trc-capitals-3-million-share-mini-tender-offer-2015-09-01) to buy up to 3 million of the telecom company's shares. AT&T recommended that shareholders reject the offer. Shares were up 1%.

Intel Corp.(INTC) rose 2.3% after the tech giant late Tuesday said it is overhauling its flagship line of computer chips (http://www.wsj.com/articles/intel-overhauls-chips-in-bid-to-revive-pc-sales-1441155601).

Other markets: European stock markets started the day higher, but pared gains in midmorning action. October WTI crude fell $1.38, or 3%, to $44.03 a barrel on the New York Mercantile Exchange. Gold inched lower, while the ICE dollar index rose 0.4% to 95.81.

Sara Sjolin contributed to this article.

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(END) Dow Jones Newswires

September 02, 2015 13:12 ET (17:12 GMT)

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