* Business activity jumped in May - Philadelphia Fed
* Financial, tech lead S&P gainers
* Cisco sinks on bleak 4th-qtr revenue forecast
* Indexes up: Dow 0.18 pct, S&P 0.27 pct, Nasdaq 0.52 pct (Updates to early afternoon)
By Yashaswini Swamynathan
May 18 (Reuters) - U.S. stocks rose as upbeat economic data emboldened investors to return to the market on Thursday, a day after Wall Street suffered its worst selloff in eight months following a political turmoil involving President Donald Trump.
Reports that Trump had tried to intervene in an ongoing federal investigation cast a shadow on his presidency and the future of his pro-growth agenda.
Wall Street rebounded after 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.
"Even if we have a big, prolonged mess in Washington, it's not going to necessarily hurt the economy," said Tony Roth, chief investment officer at Wilmington Trust in Wilmington, Delaware.
"As long as the economy holds up, I think the market is going to brush off what is going on in Washington."
At 12:36 p.m. ET (1636 GMT), the Dow Jones Industrial Average was up 37.17 points, or 0.18 percent, at 20,644.1, the S&P 500 was up 6.43 points, or 0.27 percent, at 2,363.46 and the Nasdaq Composite was up 31.08 points, or 0.52 percent, at 6,042.31.
Indexes briefly pared gains after a speeding car crashed into pedestrians in New York City's Times Square, killing one and injuring more than a dozen people. The incident did not appear to be an act of terrorism, witnesses, police and news media said.
Investors saw an opportunity to pick up beaten down stocks.
"I'm not concerned, just yet, that we're on the cusp of a major breakdown in the market. From a very short term perspective this is a very good buying opportunity," said Paul Nolte, portfolio manager at Kingsview Asset Management LLC in Chicago, Illinois.
The S&P 500 financials and technology sectors, which were the worst hit on Wednesday, rebounded to give the biggest boost to the broader index.
Apple was up 1.5 percent after registering its steepest decline in over a year.
Cisco tumbled 7.7 percent after the networking gear maker forecast current-quarter revenue that came in below analysts' estimates.
Wal-Mart was up 2.4 percent at $76.91 after the big-box retailer's quarterly earnings beat analysts' expectations.
Advancing issues outnumbered decliners on the NYSE by 1,440 to 1,373. On the Nasdaq, 1,544 issues rose and 1,205 fell.
The S&P 500 index showed 13 new 52-week highs and 15 new lows, while the Nasdaq recorded 28 new highs and 77 new lows. (Reporting by Yashaswini Swamynathan in Bengaluru; Editing by Saumyadeb Chakrabarty and Anil D'Silva)