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Dow Gains Over 200 After Late Rally

Stocks logged their third best day of the year Wednesday, led by energy and financials, as investors scooped up beaten-down shares and cheered a housing report.

The market had been up all day but a late rally helped push all three major indexes up over 2 percent.

The Dow Jones Industrial Average rose 225.52, or 2.3 percent, to close at 10,249.54, after sliding 1.1 percent in the previous session. The S&P 500andNasdaq each gained 2.6 percent.

American Express , Disney and Hewlett-Packard were the Dow's top gainers.

JPMorgan rose after the stock was upgraded to "buy" from "neutral" by UBS. The S&P financial-sector index gained more than 2 percent.

Still, not everyone is convinced today's gains are here to stay.

“This is a fake rally—stocks are going up today and there’s no rhyme or reason,” said Todd Schoenberger, managing director at LandColt Trading. “From this point, don’t be shocked if we see another 5 percent S&P drop in June because there’s too much evidence for bears to win this tug of war match.”

Schoenberger favors cash and high-yield bonds over equities.

Energy stocks, which were hardest hit in Tuesday's selloff, were among the biggest gainers today as investors took advantage of the low valuations.

BP rebounded as JPMorgan kept its "overweight" rating on the stock which it said has become heavily undervalued during the spill crisis.

In a renewed effort to halt the unrelenting oil, BP sent robot submarines wielding powerful cutting tools 5,000 feet down into the ocean.

Meanwhile, President Barack Obama vowed an overhaul of laws and regulations needed to prevent a repeat of the April 20 rig explosion that killed 11 people and triggered the spill.

Halliburton shares surged 12 percent after the company said there is plenty of work in the offshore oil industry, even if the Obama administration bans deep-water drilling for six months.

Oil rose for the first time in three days, settling at $72.86 a barrel, while gold fell to $1,220.60 an ounceas investors cashed in some of the previous session's gains. The dollar rose against both the euro and yen after the resignation of Japanese Prime MinisterYukio Hatoyama.

Meanwhile, during the FCIC hearing, Warren Buffett distanced himself from embattled credit rating agencies such as Moody's and Standard & Poor's, which is owned by McGraw-Hill , saying they have lost some of their appeal as an investment amid criticism over their role in propelling the financial crisis.

"I think they were wrong like everyone else,'' Buffett said and "looking back," Moody's should have recognized there was a housing bubble and not given such good ratings to what turned out to be disasterous investment vehicles.

"Rating agencies sort of evolved into this national duopoly,'' he continued. "The market will continue to demand from the brand names. I wish it weren't the case."

Apple advanced amid buzz about Steve Jobs' appearanceat the D8 digital conference.

Ford shares climbed after the auto maker said its US sales in May jumped more than 20 percentfrom the same time last year. Rival General Motors saw a 30 percent jump in sales of its remaining brands, while Toyota sales rose just 6.7 percent.

In the day's economic news, pending-home sales jumped 6 percentin April from March to their highest level since October. Economists had expected a gain of just 4.3 percent.

Plus, mortgage applications fell for a fourth straight weekand planned layoffs rose 1.3 percentin May from April but were down 65 percent from a year earlier. The private-sector hiring ADP employment report would normally be out today, two days before the monthly jobs report, but it was delayed by a day because of the Memorial Day holiday.

Forecasts for Friday's May jobs report are particularly optimistic, with economists expecting to see that 425,000 jobs were added to nonfarm payrolls last month and that the unemployment rate dropped to 9.8 percent.

“If we have a 6-digit figure in private sector employment, then stocks will move higher,” Schoenberger said. “But that’s going to be unlikely — I see private sector employment reach no more than 50,000.”

“And seasonally during the summer, you go into a slower job hiring pattern,” he said.

Shares of United Airlines parent UAL jumped after Bank of America-Merrill Lynch resumed coverage of the stock with a "buy" rating.

Target shares rose following news that the the discount chain will begin selling Amazon's Kindle in all stores starting this weekend.

Collective Brands tumbled after the company reported its first-quarter results.

Amgen shares continued to climb after the FDA approved the company's bone-strengthening drug, Prolia, for postmenopausal women at risk for fractures.

Google expects to release its Chrome computer operating system in the "late fall," as it aims a competitive strike at rival Microsoft Windows.

Volume was slightly more than average, with 1.35 billion shares changing hands on the New York Stock Exchange. Advancers outpaced decliners, roughly 5 to 1.

Still to Come:

WEDNESDAY: Earnings from Hovnanian
THURSDAY: May chain-store sales; Blagojevich trial begins; Fed's Lockhart, Hoenig speak; ADP employment report; weekly jobless claims; productivity; factory orders, ISM services index
FRIDAY: May jobs report; Fed's Lockhart speaks; Walmart shareholder meeting; Sprint's first 4G phone goes on sale

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