Stocks Gain, Led by Banks; Chips Slide

Stocks rose Wednesday ahead of news on the U.S. economy to be released Wednesday from the Federal Reserve.

The Dow Jones Industrial Averagewas up more than 60 points, led by Alcoa , JP Morgan and AIG . Hewlett-Packard and Intel fell.

The S&P 500and Nasdaq also rose. TheCBOE Volatility Index, widely considered the best gauge of fear in the market, is down below 24.

All key S&P sectors were higher, led by financials, industrials and materials.

The brighter move was triggered at least in part as fears eased of a European sovereign debt crisis after the Portuguese government successfully raised 1.04 billion euros ($1.32 billion).

Tuesday marked the first losing session in five for theDow and the S&P 500. But the major averages are up 3 to 4.5 percent so far for September, which is unusual for September.

One reason the market is higher is that there are few sellers left, and lots of investors ready to buy stocks at the slightest hint of good news, said Keith Springer, president of Capital Financial Advisory Services.

"What you have is pent-up demand, or pent-up hope and optimism," Springer said. ".At the slightest hint of good news, you have people rushing in."

While the market was largely higher Wednesday, stocks of PC and semiconductor chip makers were under pressure from downgrades by UBS Securities. Among the downgrades, UBS cut Intel to "neutral" from "buy" citing weak demand for personal computers and price cuts in the fourth quarter. The brokerage also lowered its price target for Intel to $19.50 per share from $28 per share.

UBS also reportedly cut HP to "neutral" from "buy" as well.

But the brokerage reiterated its buy rating for Apple , and raised its price target for the tech company's stock to $350 per share from $340. UBS cited continued strong demand for Apple's iPad and the iPhone4.

In other tech news, Hewlett-Packard and Oracle shares were down a day after HPsued Oracle over the hiring of its ex-CEO Mark Hurd, sparking critical comments from Oracle.

And chipmaker Altera increased its guidance for third-quarter revenue growth.

In other corporate news, BPreleased an internal reporton the April blast on the Deepwater Horizon that blamed Transocean for missing danger signs and Halliburton for cementing the well improperly.

Meanwhile, Talbots sank after the women's clothing retailer posted lower-than-expected sales for the quarter, although the company beat earnings expectations. Sales fell 1.3 percent to $300.7 million, shy of the forecasted $313.9 million. Same-store-sales fell 1.4 percent.

Navistar's shares tumbled too after the truck maker reported sales that were less-than-expected. The company also cut its sales forecast for the year.
In merger and acquisitions news, Airgas rejected the latest offer from Air Products and Chemicals , saying the offered price of $65.50 was too low, according to Reuters. Glass Lewis, a proxy firm, advised Airgas shareholders on Tuesday to vote against the offer and support incumbent directors up for election to the board next week.

And shares of ZymoGenetics skyrocketed more than 80 percent after Bristol-Myers Squibb agreed to buy the biotechnology company for $9.75 per share, 84 percent above the company's closing price on Tuesday.

Tyco shares rose after the board of the diversified industrial company U.S. industrial conglomerate authorized a $1 billion stock buyback. 

European shares were lower, with banks leading the declines as concerns over the strength of the sector continued. Attention is on Ireland,which extended guarantees to its banking industry and depositors.

On the economic front, applications to buy new homes rose 6.3 percent last week, the highest pace since May, but refinance applications dropped, leading to a total seasonally adjusted fall of 1.5 percent in loan requests, the Mortgage Bankers Associations reported Wednesday morning. Applications for new homes are still nearly 40 percent behind a year ago.

The main economic news of the day is the Federal Reserve's "beige book," a region-by-region assessment of the nation's economy, due out at 2 p.m. The government also will issue July consumer credit figures at 3 p.m. Economists are expecting outstanding credit to have dropped by $5.3 billion in July, following a decrease of $1.3 billion in June.

President Barak Obama travels to Cleveland Wednesday to gather support for billions of dollars in new business tax incentives and infrastructure spending. Some doubt the President can convince Congress to pass those measures ahead of the mid-term elections. Obama will also state his opposition to extending tax cuts for the wealthiest Americans.

Also on Wednesday, the U.S. Treasury will sell $21 billion in 10-year notes, with the results available shortly after 1 p.m. The Treasury is set to sell $13 billion in 30-year bonds Thursday.

And the weekly crude oil inventory report from the Energy Information Administration is due at 10:30 am.

On Tap This Week:
WEDNESDAY: 10-year note auction, Fed Beige Book release, Fed's Kocherlakota speaks, consumer credit
THURSDAY: New York Fashion Week begins, McDonald's August sales, weekly jobless claims, oil inventories, 30-year Treasury bond auction; after-the-bell earnings from National Semi
FRIDAY: Wholesale trade

More From