Stocks closed higher, led by gains in technology and energy shares as well as a drop in Treasury bond yields.
Major indexes had fallen earlier in the day after weaker-than-expected durable goods data but then rebounded in the afternoon.
"I think a lot of people see setbacks to be bargain time", said Michael Metz, chief investment strategist at Oppenheimer and Co. "When declines fail to gain traction, bargain hunters step in and buy, not seeing the market in trouble."
Given the market's turbulence over the past few weeks due to rising bond yields, investors will be looking for any of the Federal Reserve's views on the economy and inflation when policymakers wrap up a two-day meeting on Thursday. The central bank is expected to keep its benchmark interest rate steady at 5.25%.
The Fed has stated recently that it expects the economy will continue to recover from a weak first quarter despite difficulties in the housing market. However, it has reiterated that inflation remains a paramount concern.
"We'd like to hear a Fed that's much closer to the center, because they're still pretty hawkish. They sound closer to tightening than to easing," said Arthur Hogan, chief market analyst at Jefferies & Co. Rate hikes tend to slow down business and can dampen corporate profits.
A few strong earnings reports lent some support to the stock market Wednesday--particularly software maker Oracle's fiscal fourth-quarter results, which boosted technology stocks.
Oracle posted a 17% rise in fourth-quarter software sales and gave a positive growth outlook for its current quarter.
"I think you're going to see a pretty flat market between now and July 4th," Andrew Seibert, senior portfolio manager at Stewart Capital, told CNBC.com. "Plus, the news that's coming out is not that Earth-shattering."
Merck was again today the best percentage performer on the Dow, rising more than 2%. The interest rate sensitive utilities sector benefited from declining bond yields. The energy sector was lifted by a rise in oil prices.
New York light sweet crude futures reversed course to trade higher after gasoline inventories fell last week by 0.7%. Traders were expecting a build up in gas supplies.
Treasury prices rose, sending yields lower.
Shares of the much-watched Blackstone Group briefly fell below $30 a share.
Nike reported a fourth-quarter net profit rise of 32% to $437.9 million.
Bear Stearns distanced itself from the fall out of the subprime decline by announcing its private-equity arm has no exposure to the two hedge funds on the brink of collapse.
Meanwhile, billionaire investor Warren Buffett added his opinion to the debate on tax breaks for private-equity firms, telling CNBC that differentials in tax for partnerships and corporations "seems illogical" because they are essentially run the same way.
In merger and acquisition news, Rupert Murdoch told Reuters he doesn't plan to raise News Corp.'s $5 billion bid for Dow Jones and completion of the deal rests solely on approval from the Bancroft family, which controls the media company.
European Stocks Close Lower
European stock markets finished lower Wednesday as concern over weakness in the U.S. subprime mortgage market continued to weigh on investor sentiment.
The London FTSE-100, Paris CAC-40 and Frankfurt DAX all closed lower.
The long-awaited merger of ProSiebenSAT1 and its national rival SBS Broadcasting, sees the broadcaster paying 3.3 billion euros ($4.4 billion) to become the second-largest in Germany after RTL Group. Shares of ProSieben gained, while the German index fell.
Also in merger and acquisition news, the Swedish government could prevent the Nasdaq's $3.7 billion takeover of Nordic bourse OMX due to concerns over tighter U.S. regulations, as it prepares to review the proposed takeover, Reuters reported, citing an official of the Swedish government. Shares of the OMX declined.
Asian Stocks Lower
Asian markets headed south for a fourth straight session, tracking yet another weak lead from the U.S. as concerns over the subprime mortgage market continued to linger.
However, China's benchmark Shanghai Composite Index defied the downturn with a 2.7% gain in the afternoon session. But turnover was modest because of concern about government policies to cool the economy.
In Japan, the Nikkei225 traded lower as exporters slid on the yen's advance against the euro.
But shares of Toshiba rose 0.7% after a report said it had won a contract with NRG Energy to build two nuclear power reactors in the U.S. Toshiba's nuclear supplier division also climbed over 6%.