* Euro rises against dollar as Greece default fears fade
* Michael Kors slumps on weak sales; weighs on rivals
* Tiffany gains as results beat estimates
* Indexes up: Dow 0.5 pct, S&P 0.6 pct, Nasdaq 0.8 pct (Adds details, changes comment, updates prices)
By Tanya Agrawal
May 27 (Reuters) - U.S. stocks were up in late morning trading on Wednesday, rebounding strongly from their steepest fall in three weeks on Tuesday, as the dollar's rally eased on reports that Greece would avoid a default.
The euro rose against the dollar, erasing earlier losses, prompted by reports that Greece and its creditors are closer to striking a deal.
The dollar enjoyed its biggest rally in two years on Tuesday, spurred by buoyant U.S. economic data that fueled expectations of an interest rate hike coming sooner rather than later this year.
The strong dollar, which means that U.S. companies earn less when sales abroad are brought back, and concerns about Greece had weighed heavily on Wall Street.
"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 11:21 a.m. ET (1521 GMT) the Dow Jones industrial average was up 95.72 points, or 0.53 percent, at 18,137.26, the S&P 500 was up 11.87 points, or 0.56 percent, at 2,116.07 and the Nasdaq Composite was up 41.08 points, or 0.82 percent, at 5,073.83.
Nine of the 10 major S&P 500 sectors were higher, with the technology sector and the health sector both rising more than 1 percent for the first time since mid-May.
Apple's 1.5 percent gain to $131.54 gave the biggest boost to the S&P and the Nasdaq.
Tiffany's shares were up 11.2 percent at $95.10 after the luxury jeweler's quarterly profit beat estimates.
Michael Kors Holdings dropped as much as 22.4 percent to a more than two-and-a-half-year low of $47 after the handbag maker reported its slowest quarterly revenue growth since it went public in December 2011.
Coach fell 5.4 percent, Kate Spade was off 3.1 percent and Fossil dropped 6.8 percent on Michael Kors' report of lower tourist traffic, weak watch demand and shipping delays due to West Coast port disruptions.
Workday fell 12 percent to $81.43 after the software maker for human resource services posted a bigger quarterly loss and forecast weak billings.
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 1,759 to 1,142, for a 1.54-to-1 ratio on the upside. On the Nasdaq, 1,516 issues rose and 1,054 fell for a 1.44-to-1 ratio favoring advancers.
The S&P 500 index showed 10 new 52-week highs and four new lows while the Nasdaq recorded 36 new highs and 32 new lows. (Editing by Savio D'Souza)