The stimulus boosted investor sentiment even as several economists cut forecasts for 2020 global growth as the fast-spreading virus hampers business operations in the world's second-largest economy.

"If China is doing what it needs to contain the worst-case scenario from a financial perspective, then maybe the weakness we saw last week was a little overdone," said Willie Delwiche, investment strategist at Baird.

Technology stocks, which are typically sensitive to growth-related concerns in China, led the charge with their 2.6 per cent gain. The China-focused Philadelphia SE semiconductor index climbed 3.1 per cent.

Alphabet dropped 2.8 per cent after Google's advertising business and new data about YouTube and Google Cloud broadly disappointed.

In early afternoon trade, the Dow Jones Industrial Average was up 469.46 points, or 1.65 per cent, at 28,869.27, the S&P 500 was up 54.49 points, or 1.68 per cent, at 3,303.41. The Nasdaq Composite was up 186.51 points, or 2.01 per cent, at 9,459.92.

Adding to the optimism was data that showed new orders for US-made goods rose by the most in nearly one and a half years in December. It comes a day after a surprise rebound in factory activity in January.

If China is doing what it needs to contain the worst-case scenario from a financial perspective, then maybe the weakness we saw last week was a little overdone

Willie Delwiche, investment strategist at Baird

The fourth-quarter earnings season is half done and nearly 70 per cent of companies that have reported so far have surpassed earnings estimates.

Ralph Lauren jumped 11.5 per cent after the retailer's holiday-quarter profit beat market expectations.

Investors were also keeping an eye on the US Democratic presidential nominating race, where technical problems delayed Iowa caucus results. Results are expected at 5 p.m. ET.

Advancing issues outnumbered decliners by a 3.24-to-1 ratio on the NYSE and by a 2.98-to-1 ratio on the Nasdaq.

The S&P index recorded 63 new 52-week highs and two new lows, while the Nasdaq recorded 111 new highs and 39 new lows.

Reuters