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* Business activity jumped in May -Philadelphia Fed
* Healthcare, tech lead S&P 500 gainers
* Cisco sinks on bleak fiscal 4th-qtr revenue forecast
* Indexes up: Dow 0.57 pct, S&P 0.67 pct, Nasdaq 0.9 pct (Updates to late afternoon, adds commentary, changes byline)
By Sinead Carew
May 18 (Reuters) - Wall Street rebounded on Thursday from its biggest selloff in more than eight months, with major indexes recovering some of the previous session's steep losses.
Strong economic data offered support, but some investors were still anxious after reports the U.S. President tried to interfere with an investigation into former National Security Adviser Michael Flynn's ties with Russia.
Stocks extended gains late in the session after showing modest increases earlier in the day.
“This whole bull market is all about panic attacks followed by relief rallies, and this was another one,” said Ed Yardeni, president of Yardeni Research Inc in Brookville, New York. “My hunch is that the Trump impeachment panic attack was a one-day wonder and we’ll move on from there.”
Equity investors are carefully watching events that could help or hurt Trump's ability to implement proposals such as tax reform and deregulation as at least some of the stock market's post election rally has been thanks to those proposals.
"People want to get some clarity on what's going to happen here," said Stephen Massocca, Senior Vice President at Wedbush Securities in San Francisco.
At 2:26 p.m. ET, the Dow Jones Industrial Average was up 117.45 points, or 0.57 percent, to 20,724.38, the S&P 500 had gained 15.7 points, or 0.67 percent, to 2,372.73 and the Nasdaq Composite had added 54.93 points, or 0.91 percent, to 6,066.17.
Earlier in the day the Philadelphia Federal Reserve said its business activity index unexpectedly rose in May after declining for the past two months. Weekly unemployment data also pointed to strength in the labor market.
Indexes briefly pared gains after a speeding car crashed into pedestrians in New York City's Times Square, killing one and injuring 22 people. The incident did not appear to be an act of terrorism, witnesses, police and news media said.
The S&P 500's biggest drivers were the Healthcare sector and the Financial sector with 0.8 percent gains. The financial and technology sectors, which were the worst hit on Wednesday.
Cisco tumbled 7.6 percent after the networking gear maker forecast current-quarter revenue that came in below analysts' estimates.
Wal-Mart was up 3.2 percent at $77.52 after the big-box retailer's quarterly earnings beat analysts' expectations.
Advancing issues outnumbered declining ones on the NYSE by a 1.23-to-1 ratio; on Nasdaq, a 1.48-to-1 ratio favored advancers.
The S&P 500 posted 14 new 52-week highs and 15 new lows; the Nasdaq Composite recorded 37 new highs and 87 new lows. (Additional reporting by Yashaswini Swamynathan in Bengaluru; Editing by Nick Zieminski)