U.S. stocks held onto gains as investors digested better-than-expected earnings reports and an improvement in consumer confidence. Bonds steadied after the previous day's sell-off as some of the furor following the Bank of Japan's unexpected increase in its yield trading band ebbed.

The S&P 500 jumped as much as 1.8%, with more than 90% of its stocks rising. The tech-heavy Nasdaq 100 also soared more than 1%. FedEx Corp. and Nike Inc.'s earnings exceeding Wall Street's estimates provided a reprieve for U.S. stocks that had been hammered since the Federal Reserve's hawkish turn last week.

Fresh U.S. data on Wednesday indicated the Fed's persistent rate hikes are serving their purpose, but a recession may still be at bay. While sales of previously owned U.S. homes fell for a 10th-straight month in November, U.S. consumer confidence rose by more than forecast to the highest since April as inflation eased and gasoline prices dropped.

"Investors are excited by the prospects of buying improving fundamentals at a cheaper price, following the past week's selloff on Fed concerns," said Mike Bailey, director of research at FBB Capital Partners. "In terms of macro data, improving consumer confidence is also adding to the favorable move in investor sentiment. However, I think inflation, the job market and earnings are top of mind for most investors at the moment."

Treasuries steadied, with the 10-year yield around 3.68% after piercing 3.70% on Tuesday. The yen fell against the dollar, after posting its biggest daily rally since 1998 on Tuesday. The dollar rose after falling for two days against a basket of currencies.

Dust is also starting to settle on Japan's decision to raise the upper limit of its 10-year bond yield, though the move has set in motion wagers the BoJ will join its peers next year in raising interest rates. Surging yields have already shrunk the worldwide stock of negative-yielding debt to about $686 billion, from a $18.4 trillion peak reached two years ago.

Elsewhere, oil price gains extended into a third day after a report showed a drop in U.S. crude inventories.

Vildana Hajric reports for Bloomberg News.

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