Stocks finished higher after a wild trading session that took the Dow briefly below 12,000 and saw major indices sell off sharply before reversing deep losses.
"The markets have been wanting to go to certain levels and they took it down there and then boom, everyone came in and bought the market and we were off to the races," said Todd Leone, head of listed trading at Cowen and Company. "We bounced off the 200-day moving average."
The quadruple expiration of futures and options on Friday "makes for a volatile week," Leone added, but the remaining two sessions are likely to be somewhat calmer than Wednesday's wild market ride.
Other traders were not so sure, however, in light of Tuesday's considerable market declines of about 2%.
"The market is going to be real choppy and very volatile and very skittish over the next several sessions, there is no reason to buy equities," said Dan McMahon, head of listed trading at CIBC World Markets, in an interview with CNBC.com. "This will be the de rigeur for the next few weeks."
Investors bid up shares in the tech sector, which led the Nasdaq to a gain of 0.90%. The Dow Jones Industrial Average closed with a modest gain after falling as much as 1.1% earlier in the session. The S&P 500 also finished higher.
"We think there's a little bit more to go on the downside," Bill Strazzullo, chief market strategist at Bell Curve Trading, told CNBC. "I think we'll see a few more percentage points to go lower and probably a couple more weeks before the dust settles."
Breadth was positive on Monday with gainers outpacing decliners by an almost two-to-one ratio on the New York Stock Exchange. All ten S&P 500 sectors closed higher as tech and energy stocks led the market to the upside while consumer stocks, both staples and discretionary, lagged.
Tech giant Microsoft said during trading hours Wednesday it will acquire privately held speech recognition firm Tellme Networks for an undisclosed amount. Microsoft shares closed up 2.5%, posting the largest gain among the 30 components in the Dow.
Shares of Qualcomm rose for the second straight day as Wall Street analysts upgraded the stock after the company boosted earnings and sales guidance on Tuesday.
Fellow Dow component General Motors reported its first quarterly profit in two years. GM announced a net profit of $950 million or $1.68 per share in the fourth quarter, topping analysts' estimate of $1.19 a share. Investors appeared to be mildly disappointed with the results, however, as the stock closed down slightly.
Financial stocks also recovered from Tuesday's thrashing on Wednesday as bargain hunters stepped in to buy shares of subprime mortgage firm Accredited Home Lenders, which saw shares surge 52%.
Lehman Bros. reported record first-quarter earnings a penny above analysts' estimates but the investment bank said results were affected by weakness in the U.S. residential mortgage sector. But Lehman said it is well protected by hedges against losses in the subprime market.
Shares of American Express were among the Dow's biggest daily winners, rising 1.75%.
Transportation stocks closed lower on weakness in airline stocks. UAL Corp., the parent of United Airlines, closed down 2.7%.
New York light crude futures closed just above $58 a barrel after the Energy Department said crude inventories rose 1.1 million barrels last week.
In economic news, U.S. mortgage applications rose last week, with both new purchases and refinancings driven up by the lowest long-term home loan rates since early December, an industry trade group said Wednesday.
Treasury prices were down slightly, sending yields higher.
Stocks In Europe, Asia Close Sharply Lower
Stocks closed lower in the major European indexes as investors took cues from the big selloff in U.S. markets Tuesday. Asian markets closed with significant losses as Japan shed almost 3% while South Korea closed down 2% as the strong yen and mortgage problems in the U.S. spilled into the region.
The FTSE-100, CAC-40 and the DAX all closed with losses wider than 2.5%.
In Paris, JCDecaux, the world's second-largest outdoor advertising company, posted a 4.1% rise in 2006 net profit, beating expectations, helped by strong demand in its transport division.
Tokyo's Nikkei 225 Average lost 2.92%, booking its second-biggest daily percentage fall this year, as Honda Motor and other exporters slid on concerns about a higher yen and turmoil in the U.S. subprime mortgage market.
The Kospi Index finished 2% lower, as exporters such as Samsung Electronics slumped on worries that woes in the U.S. mortgage sector would curb consumer spending in South Korea's second-biggest export market.
Hong Kong stocks tracked a slide in global equities as China Life led a broad selloff amid worries that a crisis in the U.S. mortgage market could slow consumer spending in the world's biggest economy.