Stocks show partial rebound after steep sell-off

NEW YORK -- Investors shuttled between optimism and pessimism Wednesday, finally betting that the government might help the economy out of recession after all.

News in late afternoon that key lawmakers agreed on the $789 billion economic stimulus plan sent stocks moderately higher. The advance, which came in a back-and-forth session, came a day after stocks plunged on worries about the government's financial industry bailout plan.

The stimulus measure includes provisions for unemployment benefits, food stamps, health coverage and more. It also includes billions for states facing yawning budget gaps.

Investors have been eager for any signals that the economy could begin to recover. Supporters hope the bill's mix of spending and tax cuts will increase consumer spending, which accounts for more than two-thirds of U.S. economic activity. Spending has stalled since the mid-September bankruptcy of Lehman Brothers Holdings froze credit markets and deepened the recession.

Washington was again the driver behind the market's moves on Wednesday. A day earlier, investors showed frustration with what they saw as a lack of details from Treasury Secretary Timothy Geithner on how the government plans to direct trillions of dollars in public and private aid to support the ailing financial system. Major stock market indexes tumbled more than 4%.

Chief executives of the nation's top banks appeared before a House committee Wednesday to answer questions about how they have put to use more than $160 billion in taxpayer money to date.

The testimony and the stimulus agreement commanded the market's attention.

Anthony Conroy, managing director and head trader for BNY ConvergEx Group, said investors are simply trying to keep ahead of the rush of news about the banking system and the economy.

"I think everybody is trying to get through all this news. Without healthy financials it's very hard to have a healthy economy," he said. "Everybody has to digest all the tidbits of information that are coming out."