Fed fuels stock bounce

NEW YORK (CNNMoney.com) -- Wall Street endured another wild ride Tuesday, but finished higher as the Federal Reserve suggested it was not panicked about recent credit market woes.

The Dow Jones industrial average (up 35.52 to 13,504.30, Charts) gained about 35 points, or more than 0.2 percent, after moving more than 120 points above and below the breakeven point during the session.

The broader S&P 500 (up 9.04 to 1,476.71, Charts) rose 0.6 percent, while the tech-fueled Nasdaq Composite index (up 14.27 to 2,561.60, Charts) climbed more than 0.5 percent.

As expected, the Fed held interest rates steady at 5.25 percent for the ninth straight time at its policy meeting Tuesday.

In the closely watched accompanying statement, the central bank acknowledged it was concerned about growing credit problems in the economy, but also stressed that inflation remains its primary concern.

Stocks initially sold off on the news before moving to session highs as investors realized that policymakers were not panicking about recent woes in the credit markets. At the same time, the statement suggested that the Fed would not cut interest rates any time soon.

"I think they [Fed policymakers] have their eye on inflation and [the] economy and right now don't see a lot of spillover into the actual economy from what's gone on over the past couple weeks," said Scott Anderson, senior economist at Wells Fargo & Co., following the Fed's decision. "I still think the economy is playing out pretty much according to the Fed's plan."

Investors around the world have been rattled by signs of tougher conditions in credit markets, since tighter credit could raise the cost of borrowing for companies, hurting corporate earnings and slowing the recent buyout boom.

Treasurys eased following the Fed decision, lifting the yield on the benchmark 10-year note to 4.78 percent from 4.74 percent late Monday. Bond prices and yields move in opposite directions.

Tech bellwether Cisco Systems (up $0.19 to $29.69, Charts, Fortune 500) posted earnings and revenues that topped Wall Street estimates, the company reported after the closing bell Tuesday. Shares of the computer networking company climbed nearly 6 percent in after-hours trading.

Stocks seesawed earlier in the session as investors weighed a host of quarterly earnings and a weaker-than-expected productivity report, just a day after the Dow industrials soared 286 points.

Worker productivity grew at a slower-than-expected pace during the second quarter, the Labor Department reported, while a key inflation component in the report came in slightly higher than expected.

Corporate earnings were mixed Tuesday as a number of companies delivered quarterly results. Tyco International (down $0.56 to $47.44, Charts) and power provider Duke Energy (up $0.96 to $18.86, Charts, Fortune 500) both fared better than analysts' projections.

Casino operator Wynn Resorts (up $10.81 to $118.20, Charts) reported sharply higher earnings that blew past Wall Street estimates, sending its shares over 12 percent higher on the Nasdaq.

The pace of earnings looks to continue Wednesday as News Corp. (Charts, Fortune 500) and Sprint Nextel Corp. (Charts, Fortune 500) are both due to report quarterly results before the opening bell.

On a sector basis, homebuilders were among the gainers with companies such as Beazer Homes USA (Charts, Fortune 500) and Pulte Homes Inc. (Charts, Fortune 500) climbing sharply during the session. The financial sector, which has been hard hit recently amid credit market fears, was modestly higher as the KBW Bank Index (Charts) finished nearly 1 percent higher, while the AMEX Securities Broker/Dealer index (Charts) gained 1.2 percent.

Market breadth was positive. Winners beat losers by nearly 3 to 2 on the New York Stock Exchange on volume of 2.24 billion shares. Advancers topped decliners on the Nasdaq by the same ratio on volume of 2.74 billion shares.

Oil prices moved higher after tumbling more than $3 a barrel in Monday trade. U.S. crude for September delivery rose 36 cents to $72.42 a barrel on the New York Mercantile Exchange.

The dollar gained against the euro and eased versus the yen.

COMEX gold for December fell $1 to $682.30 an ounce.