Investors struggled but managed to turn Wall Street's best performance this year into a two-day advance.
Stocks ended with modest gains Wednesday but the Dow Jones industrial average still recorded its first two-day climb since Feb. 5-6. The buying was far more subdued than on Tuesday when Citigroup Inc.'s upbeat assessment of its business sent investors rushing into the market, in part to cover bets that stocks would continue to slide. The Dow on Wednesday ended up nearly 4 points after jumping 379 the day before.
The session's mood was more tentative than some investors might have hoped for but investor expectations are so modest that even holding most of the gains after the rally would have seen as a victory.
Investors nervous about the economy likely will need more good news to keep up the buying, analysts said.
"People are looking past the sizzle and saying where's the steak," said Doug Roberts, chief investment strategist for ChannelCapitalResearch.com.
Financial stocks that led the market's huge rally Tuesday continued to pull ahead Wednesday. Tech stocks rose after an analyst raised Hewlett-Packard Co.'s rating.
Analysts were again cautioning that the market remains deeply troubled by the problems in the banking industry and the impact of the recession on companies in all industries.
According to preliminary calculations, the Dow rose 3.91, or 0.1 percent, to 6,930.40. The Standard & Poor's 500 index rose 1.76, or 0.2 percent, to 721.36, while the Nasdaq composite index, which has a heavy representation of tech stocks, rose 13.36, or 1 percent, to 1,371.64.
The Russell 2000 index of smaller companies slipped 1.45, or 0.4 percent, to 366.30.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.75 billion shares.
Short-term traders were dominating the market again, analysts said, adding to the choppiness Wednesday.
Tuesday's rally was primarily a short-covering rally, said Jeff Mortimer, chief investment officer for Charles Schwab Investment Management. He said long-term buyers will need to return for the market to hold its levels and build a sustainable advance. Short covering occurs when investors need to buy stock to replace shares that were borrowed and then sold on expectations of a market decline.
On Wednesday, the head of the Securities and Exchange Commission said the agency "hopefully" will propose next month the reinstatement of the uptick rule, which aims to prevent a massive plunge in stock price fueled by short selling. It expired in 2007 and supporters say its absence has added to the market's volatility.
For there to be a sustained advance, there has to be "many, many days of positive tone and the market interpreting data and news as more positive than negative," said Roman Dubczak, head of equity capital markets at CIBC World Markets.
Bear market rallies can last longer than a single day, said Mike Stanfield, chief executive of VSR Financial Services.
A bear market is defined as a drop of 20 percent from a market peak; Wall Street does have rallies during bear markets, but they tend to disappear quickly as investors remain pessimistic. Both the Dow and S&P are at levels less than half the record highs they reached in October 2007.
"If you go back a year and a half, every single rally has turned out to be a bear market rally," Stanfield said. "So I think you'd have to guess that this is another (one)."
Investors kept their eyes on the financial industry Wednesday, as many analysts believe it will be the leading indicator of when the market begins to turn around.
"The easiest thing to watch is the financials," Stanfield said. "We're not going to have a solid recovery beginning until we make a solid bottom on financials."
Citigroup rose 9 cents, or 6.2 percent, to $1.54. JPMorgan rose 90 cents, or 4.6 percent, to $20.40. The company has yet to post a quarterly loss since the financial upheaval began in 2007.
Apple Inc. rose $4.05, or 4.6 percent, to $92.68 after announcing a new version of its iPod shuffle music player. Hewlett-Packard jumped $1.57, or 5.8 percent, to $28.61.
Bond prices were mixed. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 2.90 percent from 3 percent late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, was flat at 0.24 percent from Tuesday.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell $3.38 to settle at $42.33 a barrel on the New York Mercantile Exchange.
Overseas, Japan's Nikkei stock average jumped 4.6 percent. Britain's FTSE 100 fell 0.6 percent, Germany's DAX index rose 0.7 percent, and France's CAC-40 rose 0.4 percent.