Possible Fed move propels stocks

NEW YORK -- Stocks rebounded sharply Wednesday as investors, growing more optimistic about chances for an interest-rate cut, sought bargains after the previous session's huge tumble. The Dow Jones industrials gained almost 250 points.

Many investors believe the Federal Reserve will cut interest rates at its next meeting on Sept. 18 or even sooner and were preparing for Fed Chairman Ben Bernanke to hint at such a move on Friday at a speech in Jackson Hole, Wyo. The possibility of a rate cut has given Wall Street 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.

News that Bernanke said in a letter to New York Sen. Charles Schumer that Fed policymakers are "prepared to act as needed" if the market's turbulence hurts the economy helped pad the market's gain.

The Fed, although it has not yet indicated that it will indeed 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 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.

Wall Street was also enthusiastic about signs of corporate muscle. A jump in oil prices fed a rally in energy company stocks, and positive news from technology companies including Seagate Technology gave that sector a boost.

The Dow rose 247.44, or 1.90 percent, to 13,293.44, near its highs of the session. The blue chip index tumbled 280 points on Tuesday amid pessimism about the Fed's intentions.

Broader stock indicators also jumped. The Standard & Poor's 500 index added 31.40, or 2.19 percent, to 1,463.76, while the Nasdaq composite index gained 62.52, or 2.50 percent, to 2,563.16.