* Euro rises against dollar as Greece default fears fade
* Michael Kors slumps on weak sales; weighs on rivals
* Airlines snap 5-day losing streak as oil prices fall
* Tiffany gains as results beat estimates
* Indexes up: Dow 0.6 pct, S&P 0.7 pct, Nasdaq 0.9 pct (Updates to early afternoon)
By Tanya Agrawal
May 27 (Reuters) - U.S. stocks rose higher in afternoon trading on Wednesday, on track for their best day since mid-May, on reports that Greece would avoid a default.
The reports of Greece and its creditors moving close to striking a deal pushed the euro higher against the dollar, which had been rallying since Tuesday.
The rally was spurred by buoyant U.S. economic data, which fueled expectations of an interest rate hike sooner rather than later.
The strong dollar, which means that U.S. companies earn less when sales abroad are brought back, and concerns about Greece had on Tuesday pushed Wall Street to its steepest fall in three weeks.
"What we are seeing today is a traditional bounce back," said Michael Wall, president and founder of Retire Well and WALL Financial Group.
"I expect the sideways trend to continue though the market will continue to grind for gains in the coming few months."
At 12:41 p.m. ET (1641 GMT) the Dow Jones industrial average was up 105.16 points, or 0.58 percent, at 18,146.7, the S&P 500 was up 13.7 points, or 0.65 percent, at 2,117.9 and the Nasdaq Composite was up 43.69 points, or 0.87 percent, at 5,076.44.
The last time all three indexes were higher was on May 14.
Nine of the 10 major S&P 500 sectors were higher, with the technology and health indexes both rising more than 1 percent.
The energy sector was off 0.2 percent, falling for the third straight session, as the rising dollar weighed on oil prices. Low oil prices helped the Dow Jones airlines index break a 5-day losing streak to rise 1.8 percent.
Apple and Microsoft, both up about 2 percent, gave the biggest boost to the S&P and the Nasdaq.
Michael Kors dropped as much as 24 percent to a near three-year low of $46.10 after the handbag maker reported its slowest quarterly revenue growth since going public.
Coach fell 4.8 percent, Kate Spade was off 4.2 percent and Fossil dropped 6.9 percent on Michael Kors' report of lower tourist traffic, weak watch demand and shipping delays due to West Coast port disruptions.
Tiffany's shares were up 12.1 percent at $95.83 after the jeweler's profit beat estimates.
Workday fell 11.1 percent to $82.25 on the software maker's weak results and forecast.
GlobeImmune slumped as much as 59.6 percent to a record low of $3.33 after its hepatitis B drug failed in a mid-stage trial.
Advancing issues outnumbered decliners on the NYSE by 1,927 to 1,029, for a 1.87-to-1 ratio on the upside. On the Nasdaq, 1,678 issues rose and 983 fell for a 1.71-to-1 ratio favoring advancers.
The S&P 500 index showed 16 new 52-week highs and four new lows while the Nasdaq recorded 47 new highs and 39 new lows. (Editing by Savio D'Souza)