Stocks ended higher Wednesday as a surge in the final minutes of trading pushed all three indexes in positive territory.
The Dow Jones Industrial Average rose 90 points, or 1.2 percent. The S&P 500 added 0.5 percent and the Nasdaq gained 0.8 percent.
With each new rally, investors want to know: Is it for real this time?
DA Davidson said if the S&P breaks above 866, it would "signal to us a major trend reversal and most likely the formal end of the current bear market."
Until then, however, it's just a "significant bear market rally," the analysts wrote in a note to clients.
Stocks had started the day higher after new-home sales rose more than expected and durable-goods orders unexpectedly rose, snapping a six-month slide, offering some hope that the economy is on the mend. Then, the air came out of the rally in afternoon trading amid disappointment in poor demand in a U.S. Treasury auction, before the late rally turned things around.
This came after Tuesday's flop, which sent major indexes down more than 1 percent.
New-home sales rose 4.7 percentto a 337,000 annual rate in February, much higher than the 300,000 expected. However, the median home price fell by a record 18.1 percent to $200,900 from a year ago. And mortgage applications surged 32.2 percentlast week, buoyed by a drop in mortgage rates and a flock of refinancing moves, which made up 78.5 percent of the gain.
Homebuilder stocks finished mostly higher, with Hovnanian up 12 percent and DR Horton jumped 5.8 percent.
"Sales remain incredibly weak but, as with the existing sales numbers, we are prepared to hazard the view that the post-Lehman meltdown is now over and the market is stabilizing," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. "That's not the same as a recovery, but it is better than continued declines in sales."
Durable-goods orders jumped 3.4 percentto $165.6 billion in February, an unexpected move, after six straight months of decline.
Some investors were also encouraged by comments from President Obama, delivered in a prime-time address last night, that he was seeing signs of progressin his drive to lead the U.S. out of the recession. He also said the Federal Reserve is preparing to start buying Treasurys to boost the money supply.
But the measure is far from spurring the enthusiasm it did when it was first announced.
"I am a bit concerned on spending… this is one of the things that's going to lead to a weaker dollar down the road," Jared Levy from Financial Markets Education told CNBC.
Techs finished mostly higher but some weakness still persisted in the sector after IBM said it would lay off a large number of U.S. employees in its services unit and outsource many of the jobs to India.
Chip stocks ended mixed after an earlier bump when Citigroup raised its price target on several companies in the sector, citing the "general improvement in semiconductor conditions since the Chinese New Year." Citi raised its targets on Cypress Semiconductor , Intel and Micron Technology .
Wells Fargo gained 5.9 percent, even after Moody's cut its credit ratings on the bank.
Banks finished mostly higher, including Dow components Bank of America and JPMorgan , but Citigroup skidded.
Bank of America CEO Ken Lewis told the Los Angeles Times he wants to start repaying the $45 billion the bank has received in bailout money back as early as next month.
Ford shares shed 3.2 percent following news that it's in serious talks with potential buyers to sell its Volvo unit.
Late Tuesday, Standard & Poor's revised its outlook on investor Warren Buffett's Berkshire Hathaway, cutting its Berkshire Hathaway Finance unit to negative from stable, because declines in shares values in 2009 meant the group's capital may no longer be adequate for its triple-A rating.
Still to Come:
THURSDAY: Final GDP; Weekly jobless claims; new-home sales; earnings from Best Buy, GameStop; Geithner to unveil plan for overhauling the financial system; Fed's Lockhart, Fisher, Lacker and Stern speak
FRIDAY: Personal income/spending; Consumer confidence; Obama meets with bankers
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