U.S. investors appeared to take heart after President-elect Barack Obama pledged he would have a plan to deal with the nation's economic crisis on his first day in office. The Dow Jones industrial average finished up 247.14 points, or 2.91 percent, at 8,726.61. It was the first time the Dow has had four straight winning sessions since April 15-18.
European markets earlier closed mostly lower, though the recovery on Wall Street from a morning downturn helped them get back a large chunk of their losses.
The FTSE 100 index of leading British shares closed down 18.56 points, or 0.4 percent, at 4,152.69, having been around 100 points lower earlier in the session.
Jeremy Batstone-Carr, head of research at Charles Stanley, said investors in the U.S. were clearing positions as they did not want to be left too exposed over the long holiday weekend and that involved both buying and selling shares. Though Wall Street is open for business on Friday, trading is expected to be light as many investors stay away.
"We can put a lot of this down to Thanksgiving," he said.
Earlier in the session, investors had been spooked by some further disappointing U.S. economic data, in particular the news that durable-goods orders to U.S. factories fell by 6.2 percent in October and that new home sales fell to a 17-year low during the month.
The markets have had a lot to digest this week, not least the weekend bailout of Citigroup Inc. and Tuesday's latest attempt by the U.S. government to shore up its financial system.
The U.S. Treasury and the Federal Reserve said they will inject another $800 billion into the U.S. economy to help unfreeze the market for consumer debt and to make mortgage loans cheaper and more available. The program is aimed at reviving moribund credit markets to get financial institutions to start lending to consumers and households again.
"There's a little bit of bailout fatigue in the markets after a couple of good days and investors are battening down the hatches ahead of Thanksgiving," said Howard Wheeldon, senior strategist at BGC Partners.
This so-called "bailout fatigue" was evident Wednesday with markets' muted reaction to the European Commission's announcement it wants EU governments to jointly combat the growing economic slowdown with a 200 billion euro ($256 billion) stimulus plan to boost growth and confidence among consumers and businesses.
Latin American shares showed little sign of fatigue, however. Brazil's Ibovespa index rose 4.8 percent to 36,470, while Mexico's IPC index gained 3.8 percent to 20,026. Argentina's Merval index jumped 5.3 percent to 955 and Chile's IPSA added 0.3 percent to 2,421.
Earlier, investors in Asia snapped up a number of resource companies after Australia's BHP Billiton Ltd., the world's biggest mining company, abandoned its hostile takeover bid rival Rio Tinto Ltd. Australia's main index declined 2.3 percent.
However, Japan's Nikkei 225 stock average dropped 110.71 points, or 1.3 percent, to 8,213.22 after Fitch Ratings cut Toyota's credit rating two notches to "AA" from "AAA."
Fitch blamed the world's auto market slump and a strong yen - the latest sign that even a premier brand like Toyota isn't immune to the global slowdown. Toyota shares dropped 4.6 percent, and Honda Motor lost 1.9 percent.
Meanwhile, Thai stocks ended little changed despite further turmoil in the country after the main international airport canceled all flights as thousands of protesters swarmed the complex in efforts to bring down the government.
Oil prices rose sharply, triggered by a large interest rate cut in China and news of a possible Russian output cut. In New York Mercantile Exchange trading, light, sweet crude for January delivery jumped more than 7 percent, or $3.67, to settle at $54.44 a barrel.
In currencies, dollar rose against most other major currencies. The euro dropped to $1.2899 from $1.3022 late Tuesday, while the British pound fell to $1.5350 from $1.5440. The dollar edged up to 95.73 Japanese yen from 95.65 yen.