By Edward Krudy
NEW YORK (Reuters) - Wall Street rose after three days of losses on Wednesday on stronger-than-expected growth in China, but investors closely watched developments in Europe's debt crisis that has weighed stocks recently.
Testimony from Federal Reserve Chairman Ben Bernanke shortly after the market opens will also be scrutinized for hints of possible new stimulus measures after June's dismal U.S. employment report. The testimony to the House Financial Services Committee will begin at 10 a.m. (1400 GMT).
Optimism about the global economy gathered pace after data showed China's economy grew faster than expected in the second quarter, easing fears about a hard landing in the world's second-largest economy.
John Canally, investment strategist at LPL Financial in Boston, said the Chinese data was a "Goldilocks scenario where it's slowing but not slowing enough to cause a crash."
But he said sovereign debt issues in Europe and the debate over the U.S. budget were wild cards for markets.
"We are positioned defensively but not bearishly," he said. "We have more cash than we would have otherwise. We have hedges on against the S&P's declining. We have a short euro bet on."
The Dow Jones industrial average <.DJI> gained 63.42 points, or 0.51 percent, to 12,510.30. The Standard & Poor's 500 Index <.SPX> gained 7.53 points, or 0.57 percent, to 1,321.17. The Nasdaq Composite Index <.IXIC> gained 22.19 points, or 0.80 percent, to 2,804.10.
Investors remained cautious over developments in Europe. Moody's downgraded Ireland's debt to junk on Tuesday and said Ireland was likely to follow Greece in needing a second bailout. Irish bond yields jumped to record highs.
U.S. stocks closed lower for a third straight day on Tuesday as Europe's fiscal woes and a weak start to tech earnings gave investors little reason to buy.
Electronic Arts Inc
(Editing by Kenneth Barry)
