Stocks Advance As Wall Street Goes Hunting for Bargains

Stocks rebounded Wednesday as investors, though still uneasy about shrinking credit and its effect on the economy, scooped up bargains after the previous session's huge tumble. The Dow Jones industrials gained more than 100 points.

Many investors expect the Federal Reserve to cut interest rates at its next meeting on Sept. 18, or even sooner. That gives them some hope that the stock market will recover from its summer volatility, and that right now, it's a good strategy to buy while the buying is cheap.

Wall Street also appeared relieved that Altria Group Inc.'s expected spinoff of Philip Morris International cigarette business came through, and that Seagate Technology boosted its outlook for its fiscal first quarter -- a positive sign for the technology sector.

The Fed, although it has not yet indicated that it will lower the benchmark fed funds rate, has been adding cash to the banking system in an attempt to keep the credit markets liquid. The Federal Reserve Bank of New York said Wednesday that it would inject $5.25 billion through a one-day repurchase agreement, where it buys that amount in collateral from dealers who then deposit the money into commercial banks.

Stock investors also kept an eye on the credit markets for signs of loosening. Though the safest assets, Treasurys, are not seeing the same frantic buying they saw a couple weeks ago, assets with a bit more risk, like commercial paper, are having some trouble attracting buyers.

"Everyone's waiting for the dust to settle there," said Steven Goldman, chief market strategist at Weeden & Co. "We're on a little bit better footing, but we're in a healing process that takes time." He added that he regards a Fed rate cut as "mandatory."

The Dow rose 123.07, or 0.94 percent, to 13.164.92, after falling 280 points on Tuesday.

Broader stock indicators also rose. The Standard & Poor's 500 index added 13.79, or 0.96 percent, to 1,446.15, while the Nasdaq composite index gained 29.06, or 1.16 percent, to 2,529.70.

Bonds rose, indicating that some investors were still being lured to safe government securities. The yield on the benchmark 10-year Treasury note was at 4.51 percent, down from 4.52 percent late Tuesday, while the yield on the 3-month Treasury bill fell to 4.09 percent to 4.18 percent.

On Tuesday, the stock market gave back some of the robust gains it made last week as investors grew nervous again about the strength of the economy and whether the Fed will act in an effort to prevent credit troubles from spreading further.

Wall Street's plunge Tuesday triggered selling in Asia. Japan's Nikkei stock average fell 1.69 percent, Hong Kong's key index fell 1.5 percent, and China's Shanghai Composite Index fell 1.64 percent.

European markets, however, were mixed. Britain's FTSE 100 rose 0.27 percent, Germany's DAX index fell 0.01 percent, and France's CAC-40 rose 0.77 percent.

Light, sweet crude rose 94 cents to $72.67 a barrel on the New York Mercantile Exchange after the U.S. Energy Department reported larger-than-expected declines in gasoline and oil inventories, and refinery activity.

The dollar fell against other major currencies except the yen. Gold prices rose.

Altria rose 33 cents to $69.40 after announcing it would spin off Philip Morris.

The technology sector was strong, helping to boost the Nasdaq, after several analysts raised their price targets on Seagate Technology after it lifted its fiscal first-quarter outlook. Seagate rose $1.46, or 6 percent, to $25.92.

Nokia Corp. was another standout in tech, after it unveiled new Internet services and gadgets for downloading music and playing games on mobile handsets. Nokia rose $1.98, or 6.6 percent, to $31.99.

The housing market outlook remains weak, though. Mortgage application volume, refinance volume and purchase volume all fell about 4 percent during the week ended Aug. 24 compared to the prior week, according to the Mortgage Bankers Association's weekly application survey.

And despite Bank of America's $2 billion investment last week in Countrywide Financial, the mortgage lender's stock has fallen. Countrywide dropped 73 cents, or 3.8 percent, to $18.58.

The Russell 2000 index of smaller companies rose 9.31, or 1.21 percent, to 777.14.

Advancing issues outnumbered decliners by nearly 5 to 1 on the New York Stock Exchange, where volume came to 373.4 million shares.

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