Stocks modestly higher as traders try to extend rally
NEW YORK -- Wall Street tried Wednesday to extend its big rally for a second day, but there was no great burst of buying.
But analysts were still cautious, noting that it's common for the market to jump after a prolonged period of selling. They also noted that investors are well aware of the many problems facing the economy.
"Right now we're not getting encouraging fundamental data," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "I think it's too soon to call a bottom in this market despite yesterday's strong performance."
Investors are likely to keep a close watch on financial stocks as they await details on the government's plan for dealing with banks' toxic assets. Treasury Secretary Timothy Geithner said Tuesday that the Obama administration will unveil the plan within the next couple weeks.
During an interview Tuesday night on "The Charlie Rose Show," Geithner said the plan will provide financing to private investors willing to buy banks' bad assets.
Financial stocks led Tuesday's rally, which saw the Dow Jones industrials surge nearly 380 points or 5.8%.
But Tuesday's rally was also fed by short covering, which occurs when investors need to buy stock to replace shares that were borrowed and then sold on expectations of a market decline.
The big question Wednesday is whether the market can maintain its momentum throughout the day. If the Dow is able to extend its gains, it would mark the index's first back-to-back advance since early February. But the market has stumbled recently in similar situations. The Dow had gained 200 points in a single session five times this year before Tuesday's performance, only to lose ground the very next day.
"It's rare to see large gains follow large gains," Gayle said. "What we would find encouraging is getting a bounce that holds. That would suggest that we may be at the beginning of a rebound."
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