* Chinese equities recover, boosting US shares
* Weekly initial jobless claims up for second week
* Mortgage delinquencies climb in second quarter
* Indexes up: Dow 0.4 pct, S&P 500 0.8 pct, Nasdaq 0.7 pct
(Updates to late morning)
By Edward Krudy
NEW YORK, Aug 20 (Reuters) - U.S. stocks rose on Thursday after a rebound in Chinese equities and a surprise expansion in U.S. regional manufacturing overshadowed rising jobless claims.
The rally in the Chinese stock market, which had fallen as much as 20 percent in the last two weeks, helped eased fears about a key driver of the global economy.
The U.S. earnings picture was mixed as packaged food makers H.J. Heinz Co and Hormel Foods Corp both beat Wall Street estimates while retailer Sears Holding Corp posted a surprise loss, sending its shares down 12 percent.
"It looks like global money is flowing back into stocks," said Fred Dickson, market strategist at D.A. Davidson & Co in Lake Oswego, Oregon.
"U.S. investors were very concerned about what was going on in China at the beginning of the week, and now with China up over 4 percent last night that seemed to calm U.S. investors down," he said.
AIG Inc rose 28.9 percent to $34.26 after newly appointed Chief Executive Robert Benmosche said he expects the bailed-out insurer to be able to repay its federal debts and boost value for shareholders, according to a report by Bloomberg News.
The KBW Insurance index rose 1.4 percent.
The Dow Jones industrial average gained 36.12 points, or 0.39 percent, at 9,315.28. The Standard & Poor's 500 Index added 8.07 points, or 0.81 percent, at 1,004.53. The Nasdaq Composite Index rose 13.78 points, or 0.70 percent, at 1,983.02.
Factory activity in the U.S. Mid-Atlantic region turned positive in August, breaking a 10-month run of contraction, helped by a jump in new orders, a survey by the Philadelphia Federal Reserve Bank showed.
But initial claims for state unemployment insurance benefits rose by 15,000, according to the Labor Department. Analysts polled by Reuters had forecast new claims to slip.
U.S. mortgage delinquency rates continued to climb in the second quarter, while the percentage of loans that entered the foreclosure process dipped slightly, the Mortgage Bankers Association said.
Goldman Sachs added Google Inc to its Americas Conviction Buy list and raised its price target on the shares to $560. Google rose 3.2 percent to $458.30.
Shares in Heinz rose 1.5 percent to $38.50, while Hormel gained 0.5 percent to $37.41.
On Friday, investors will take in remarks from Federal Reserve Chairman Ben Bernanke, scheduled to speak to a gathering in Jackson Hole, Wyoming, on the lessons learned from the financial crisis and efforts to aid the economic recovery.