Stocks clawed their way back from a midday rout as banks surged and investors relaxed after Congress stopped grilling Tim Geithner and the hearing for his nomination as Treasury Secretary ended.
The Dow Jones Industrial Average jumped 279.01, or 3.5 percent, to close at 8228.10, after starting the day with a triple-digit gain, then taking it down to zero before revving it up again. The S&P 500gained 4.4 percentand the Nasdaq advanced 4.6 percent.
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"I think this is just an oversold bounce," said Michael Cohn, chief investment strategist at Atlantis Asset Management.
On Tuesday, the Dow shed 4 percent, ending below 8,000for the first time in two months and marking the index's worst decline ever on an Inauguration Day.
The Dow is likely to stay in this back-and-forth pattern between 8,000 and 9,000 until the hits stop coming, Cohn said. "Right now, it's just one body blow after another," he said. "Once we get through this earnings season and into February, I think the market can lift back to 9,000."
What cause the midday anxiety was the grilling of Treasury Secretary nominee Tim Geithner on Capitol Hill over his failure to pay tens of thousands of dollars in taxes. The market had rallied last year when his name was leaked as Obama's potential pick, so concern that the nomination might get squashed rattled the market.
"If Geithner does not get approved, then the market will have a big selloff and bonds will rally," Tom Sowanick, chief investment officer at Clearbrook Financial, told Reuters.
Bank stocks staged a surprise comeback after getting crushed on Tuesday.
Citigroup and Bank of America were the top two gainers on the Dow, with each gaining 31 percent, completely erasing the prior session's losses.
The stocks had started the day strong, but the bank rally gained steam following news that Bank of America CEO Ken Lewis bought $1.2 million sharesof his company's stock.
JPMorgan advanced 25 percent, rounding out the Dow's top three. After the closing bell, the company disclosed that CEO Jamie Dimon bought 500,000 shares of JPMorgan stock worth $11.5 million.
US Bancorp squeaked out a 4.9-percent rally after sitting out most of the day's rally as the bank reported its profit fell 65 percentto its lowest level since 2001.
IBM shares jumped 12 percent after the hardware giant beat Wall Street estimates due to tight cost controls and a lower tax rate. IBM also forecast a higher-than-expected 3-percent rise in 2009 earnings per share.
Swedish telecom-equipment giant Ericsson posted a stronger-than-expected fourth-quarter profit but announced 5,000 job cutsas it seeks deeper cost cuts. American depositary shares of Ericsson shot up 17 percent.
More tech earnings are on the way, including Apple after the bell today, and both Microsoft and Google on Thursday.
Meanwhile, General Motorsexpects the money from a government aid packageto arrive in the next few days as the giant car maker faces a cash shortage. Fritz Henderson, GM's president and chief operating officer, said that without the second installment of $5.4 billion, the company would run out of cash long before the end of March. GM shares ticked up 0.9 percent.
Also, after much speculation, it finally happened: Toyotasurpassed GM as the world's No. 1 auto makerby sales — the first time that's happened in 78 years.
General Electric shares fell to a new low, passing their November closing low of $12.84, after Goldman Sachs cut its price target and earnings forecast for GE, the parent company of CNBC.
If GE holds at or near this level, it would be its lowest close since March 1996. GE is the fifth worst Dow component this year, down 24 percent.
Also, United Tech said fourth-quarter profit rose 8 percent, translating to $1.23 a share and beating analysts' estimates by a penny.
And Wal-Mart saw its shares slip 1 percent after Credit Suisse cuts its outlook for the world's leading retailer from "outperform" to "neutral."
Fund manager BlackRock said fourth-quarter net income fell 84 percent and its earnings were 68 cents a share, badly missing estimates of $1.26.
Intuit shares fell to their lowest level of the day after Geithner said in his congressional testimony that he used the company's Turbo Tax softwareto do his taxes.
This Week:
WEDNESDAY: Geithner hearing; Earnings from Apple, Burlington Northern after the bell
THURSDAY: Housing starts; jobless claims; crude inventories; Earnings from Nokia, Fifth Third Bancorp; KeyCorp; Southwest Air; SunTrust Banks; United Health, Union Pacific, Google, Microsoft, AMD, Capital One
FRIDAY: Natural-gas inventories; Earnings from GE, Harley-Davidson and Xerox
ALL WEEK: Detroit Auto Show (Jan. 11-25)
Send comments to cindy.perman@nbcuni.com.