US stocks have bounced back from the prior day’s steep losses, lifted by Alcoa’s surprise quarterly profit and easing bond yields in Spain and Italy.

The Dow Jones Industrial Average on Wednesday closed up 89.46 points (0.70 per cent) at 12,805.39.

The broader S&P 500 gained 10.12 points (0.74 per cent) to 1,368.71, while the tech-heavy Nasdaq climbed 25.24 (0.84 per cent) to 3,016.46.

“Improved sentiment toward 1Q earnings season in the US is aiding the broad-based advance after Dow member Alcoa’s surprising 1Q profit,” Charles Schwab & Son analysts said.

Even so, analysts said the rebound from Monday’s sharp fall – the fifth drop in a row – underscored that the market is overall taking a breather after a strong first quarter.

“The US stock market has finally entered a normal correction,” said analysts at Wells Fargo Advisors.

“We could see the stock market decline for several weeks before completing the correction,” they said, forecasting a slide of 5-10 per cent before bottoming out.

Dow member Alcoa kicked off the quarterly earnings season after the market closed Tuesday, setting an upbeat tone with a $94 million first-quarter profit instead of the loss expected by analysts.

Alcoa shares took off, closing up 6.2 per cent to top the gainers among the 30 Dow blue chips.

Bank of America added 3.8 per cent, recovering most of a 4.4 per cent tumble on Tuesday.

Johnson & Johnson fell 0.1 per cent despite being hit with a $1.1 billion penalty in an Arkansas court for having minimised the risks of its Risperdal anti-psychotic drug.

Apple shares slipped 0.4 per cent after it was sued by the Justice Department for colluding to fix e-book prices with five major publishers.

Bond prices fell. The yield on the 10-year US Treasury rose to 2.03 per cent from 1.99 per cent Tuesday, while the 30-year yield increased to 3.18 per cent from 3.14 per cent.