Stocks closed well off their session lows on Thursday after news broke that the Federal Reserve could tighten monetary policy at a slower pace than previously expected.

The Wall Street Journal reported the central bank is considering whether to signal a wait-and-see approach to rate hikes at its upcoming meeting this month. The report said Fed officials do not know what their next move on rates will be after December.

"What this week and a half shows is an extraordinary sensitivity to headlines, more so than usual," said Delores Rubin, senior equities trader at Deutsche Bank Wealth Management. "It's been very difficult to navigate the waters so far."

The Dow Jones Industrial Average closed 79.40 points lower at 24,947.67 after plunging nearly 800 points, while the closed 0.15 percent lower at 2,695.95. The Nasdaq Composite erased its losses, closing 0.4 percent higher at 7,188.26 as Amazon, Netflix and Alphabet all rose more than 1 percent.

Stocks initially fell sharply as continuing fears over U.S.-China trade relations and concern over a possible economic slowdown kept investors on edge.

"There's concern that the trade deal is not as good as [President Donald] Trump said it was," said Mark Esposito, CEO of Esposito Securities. "Recession fears are also settling into the market."

"It's definitely safer to be in cash right now," Esposito said. "I don't think the fall is over."

Trade fears ratcheted up after news broke Wednesday that Huawei CFO Meng Wanzhou was arrested by Canadian authorities in Vancouver, where she faces extradition to the U.S. The arrest — which took place Dec. 1 — decreases the likelihood that a permanent U.S.-China trade deal will be reached. Huawei is one of the largest mobile phone makers in the world.

News of Meng's arrest comes after President Donald Trump and Chinese President Xi Jinping agreed to hold off on implementing additional tariffs on each other's goods. After an initial rally on Monday, stocks have suffered as the Trump administration's comments on details of the deal have been inconsistent.