A report the Federal Reserve could soon pause its interest rate hikes boosted stocks, offsetting trade war fears and allowing Wall Street to recover from steep losses earlier on Thursday.
The Dow Jones Industrial Average, which had lost three percent earlier in the session, finished with a drop of just 0.3 percent at 24,947.67.
The broad-based S&P 500 declined 0.2 percent to close at 2,695.95.
But the tech-rich Nasdaq Composite Index advanced 0.4 percent to end the session at 7,188.26.
US stocks had opened sharply lower as the arrest of a key Chinese executive at the urging of the United States exacerbated fears that a ceasefire in the trade war between the two countries might fall apart.
The Dow fell nearly 800 points at its low point of the day, before recovering somewhat.
Then markets got a big lift in the final hour of trading after the Wall Street Journal published a report saying the Fed could adopt a wait-and-see attitude to future interest rate hikes, following the likely increase at its December policy meeting.
Investors still broadly expect the Fed to hike on December 19, but the odds are now down to 69.8 percent, down from 82.7 percent a week ago, according to futures markets.
Large bank stocks declined amid expectations for a more dovish Fed, with JPMorgan Chase, Citigroup and Bank of America each losing two percent or more.
Petroleum-linked stocks also fell amid a pullback in oil prices as OPEC members debated a production cut to respond to weakening prices. Apache fell 3.3 percent, Halliburton 5.8 percent and ExxonMobil 2.1 percent.
Boeing shed 3.1 percent on trade war fears and as the aerospace giant continues to face scrutiny following an October 29 accident in Indonesia in which 189 people died.
The head of the carrier, Lion Mentari Airlines, has reportedly threatened to cancel orders of additional Boeing planes. But Boeing chief Dennis Muilenburg defended the aircraft and noted on CNBC that contracts are long-term and cannot be unilaterally cancelled by either partner.