Stocks advance in another volatile trading day

NEW YORK -- Stocks surged Wednesday as solid results in the technology arena and renewed demand for risky debt soothed investors a day after the Federal Reserve said the economy should keep expanding.

However, a late-day plunge and recovery revealed investors' underlying unease over how problems in lending might hurt corporate America, despite the Fed's assurances.

The Dow Jones industrial average initially soared more than 190 points, then dropped into negative territory in the last hour of trading, reportedly on speculation that investment bank Goldman Sachs Group would release some negative news. When Goldman Sachs dispelled the rumor, the Dow rebounded to finish up more than 150 points.

The sell-off illustrated how quickly sentiment can turn. The stock market has been ricocheting up and down in recent weeks on worries that borrowing will get tougher because of losses in the subprime mortgage market.

John O'Donoghue, co-head of equities at Cowen & Co., said he doubts that all the possible problems involving risky lending are resolved in investors' minds. "We'll have to see how the dust settles here in the next few days ... I don't think the market has made up its mind what it wants to do," he said.

The Fed's suggestion that it wasn't too worried about the credit markets appeared to reinvigorate them: Risky, high-yielding corporate bonds rose, while safe, low-yielding government bonds fell.

The Dow rose 153.56, or 1.1%, to 13,657.86.

The Standard & Poor's 500 index rose 20.78, or 1.4%, to 1497.49. The S&P has had its biggest three-day point gain since October 2002.