The plot thickened as China promised to pitch in on Europe's rescue fund amid speculation that European Union officials may postpone a decision on Greece's second bailout package until April.
Euro-zone finance officials are examining ways of delaying parts or even all of a second bailout program for Greece while still avoiding a disorderly default, Reuters reported, citing several European Union sources. Delays could possibly last until after the country holds elections expected in April, the sources told Reuters.
Meanwhile, People's Bank of China Governor Zhou Xiaochuan said the country will build its investments in Europe in an effort to support the region in solving its sovereign debt crisis, echoing earlier comments by Premier Wen Jiabao.
"Stability around Europe is key," Evan Bauman, a portfolio manager at ClearBridge Advisors, a unit of Baltimore-based Legg Mason, told Bloomberg News. "The sooner we put Greece out of the headlines the better for the stock market. It's in everybody's best interest to get Europe settled. Everybody realises that in order to sustain or start to grow the economy, you need to stabilise what's been driving the concerns and that's Europe."
In early afternoon trading in New York, the Standard & Poor's 500 Index rose 0.23 percent and the Nasdaq Composite Index gained 0.33 percent. The Dow Jones Industrial Average slid 0.30 percent.
In Europe, the Stoxx 600 Index rose 0.6 percent on the day.
Data showed that Europe's economy contracted less than expected in the fourth quarter. Gross domestic product in the euro-zone dropped 0.3 percent from the prior three months, according to the EU's statistics office.
Germany's GDP fell less than forecast, while that of France surprisingly increased during the fourth quarter.
"It could have been worse," Martin van Vliet, an economist at ING Group in Amsterdam, told Bloomberg. "The debt crisis has thrown the euro-zone recovery into reverse. The recent improvement in leading indicators suggests there is a fair chance that the euro-zone economy as a whole might not shrink further in the first quarter."
In the US, the most recent data kept alive expectations that the recovery in the world's largest economy is gathering steam.
The nation's manufacturing output increased in January, a gauge of factory activity in New York state rose to a 1-1/2-year high in February, while sentiment among home builders climbing to the highest level in almost five years this month.
Even so, overall US industrial production was unexpectedly steady in January, while economists had forecast an increase.
"I don't think anybody is looking at these numbers [such as industrial production] as robust, but there is a continual tone that things are getting better," Mark Lehmann, director of equities at JMP Securities in San Francisco, told Reuters.
Oil rose amid reports of Iran is threatening to suspend immediately exports to its biggest EU customers, climbing 1 percent to US$101.71 a barrel by midday in New York.
Iran's state-run Press TV said exports were cut to Italy, Spain, France, Greece, Portugal and the Netherlands, without citing anyone, according to Bloomberg. The state-run Fars news agency said Iran warned the nations without cutting exports.
"Iran is cutting off its exports to the European countries before they can cut Iranian imports," said Tom Bentz, a director with BNP Paribas Prime Brokerage in New York.