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Stocks Snap 3-Day Decline, Led by Banks

Published: Wednesday, 7 Sep 2011 | 4:40 PM ET

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By: JeeYeon Park
CNBC.com Writer

Stocks closed near session highs Wednesday to log their first gain in September amid easing worries over Europe’s debt crisis and as investors shrugged off the Fed’s Beige Book, which showed slower growth in some of the regions of the U.S.

Despite the day's gains, the major averages are still on pace for their biggest quarterly drop since the second quarter of 2010.

Major U.S. Indexes

.DJIA

.NCOMP

.SPX

The Dow Jones Industrial Average rallied 275.56 points, or 2.47 percent, to finish at 11,414.86. BofA [BAC Loading... () ] and Travelers [TRV Loading... () ] led the blue-chip gainers.

The S&P 500 jumped 33.38 points, or 2.86 percent, to close at 1,198.62. The Nasdaq surged 75.11 points, or 3.04 percent, to end at 2,548.94.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, plunged below 34.

All S&P sectors finished higher, led by energy and financials.

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“Volatility is absolutely going to continue,” warned Tim Speiss, head of personal wealth advisors at EisnerAmper. “The first half of September could look like August…Europe’s been a large driver of volatility.”

However, Speiss noted that despite all the choppiness in the recent months, the Dow at the close on Tuesday was up more than 11 percent over the past 12 months.

“Some large caps have record-low valuations, earnings are very strong and companies are holding a lot of cash,” Speiss said. “So I would not underestimate a greater growth rate in equities…I would say it’s going to beat the U.S. GDP rate and the long-bond rate.”

US Economy Is Basically 'Still in Recession': Fed's Evans

Among U.S. financials, Bank of America [BAC Loading... () ] rallied sharply after the banking giant made major changes to its staff, including the departure of Joe Price, head of consumer banking, and Sallie Krawcheck, head of global wealth and investment management.

Meanwhile, U.S. banking regulators recently asked major banks including BofA, Morgan Stanley [MS Loading... () ], Citigroup [C Loading... () ] and JPMorgan [JPM Loading... () ] to perform stress tests on their balance sheets to determine what capital raising plans they might have to take under an emergency scenario.

Deutsche Bank upgraded a handful of regional banks to a 'buy' rating including KeyCorp [KEY Loading... () ], Regions Financial [RF Loading... () ], SunTrust [STI Loading... () ], while downgrading Comerica [CMA Loading... () ].

Yahoo [YHOO Loading... () ] jumped after the Internet company said it fired CEO Carol Bartz and replaced her on an interim basis with CFO Tim Morse, ending her tumultuous run at the helm of the group.

Poll: Are You Buying Yahoo on Bartz’s Departure?

Nvidia [NVDA Loading... () ] soared more than 8 percent after the semiconductor maker said it expects fiscal 2013 sales well ahead of market expectations, helped by demand for its graphics chips.

Among energy companies, Chevron [CVX Loading... () ] rose after the oil giant announced it made a deepwater discovery in the Gulf of Mexico. And BP [BP Loading... () ] CEO Tony Hayward has returned to the oil business with an agreement to acquire Turkish explorer Genel Energy through a reverse takeover to create a Kurdistan-focused group worth $4 billion.

Meanwhile, ConocoPhillips [COP Loading... () ] apologized for an oil spill in northern China, saying the firm will establish a fund to pay for the clean-up costs.

Talbots [TLB Loading... () ] reversed their earlier losses, surging almost 20 percent after the women's clothing retailer implemented several steps to fix its long-running issues including firing its creative head. Earlier, the company posted a wider-than-expected loss.

Meanwhile, Darden Restaurants [DRI Loading... () ] declined after the parent company of Olive Garden warned that Hurricane Irene affected earnings in its fiscal first quarter.

Hovnanian [HOV Loading... () ] is scheduled to post earnings after-the-bell.

Meanwhile, gold prices ended lower in a choppy session, after rallying sharply earlier in the day. Newmont Mining [NEM Loading... () ] slipped after the miner hit an all-time high in the previous session.

Trading volume was on the lighter side with the consolidated tape of the NYSE at 3.75 billion shares, while 954 million shares changed hands on the floor ahead of a holiday weekend.

On the economic front, the recovery failed to gain speed in the recent weeks and even weakened in some areas of the nation, according to the Fed's Beige Book collection of anecdotal reports of economic conditions in the 12 Fed districts.

Also, weekly mortgage applications continued to decline, dropping 4.9 percent over the past week despite near record-low borrowing costs.

European shares closed higher after a ruling by Germany’s highest court which rejected a series of lawsuits aimed at blocking Germany's participation in bailout packages for Greece and other euro zone countries.

Greek bank stocks surged almost 20 percent, boosted by hopes by the country's government to implement reforms demanded by its international lenders.

Italy's Senate approved a multibillion-euro austerity plan to help stop the country from becoming the next victim of the euro zone's debt crisis.

Meanwhile, President Obama, plans to announce a $300 billion job-creation package during his televised speech to Congress on Thursday, according to CNN, citing Democratic sources.

—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—

Coming Up This Week:

THURSDAY: BoE announcement, ECB announcement, international trade, jobless claims, quarterly services survey, oil inventories, Bernanke speaks, consumer credit, TI mid-quarter update, OECD's global economic outlook, Obama talks jobs/economy; Earnings from Smithfield Foods
FRIDAY: McDonald's August Sales, wholesale trade, G7 finance ministers meet; Earnings from Kroger, Lululemon Athletica

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