Stocks turn higher

NEW YORK (CNNMoney.com) -- Stocks turned higher early Wednesday afternoon, following a choppy morning swayed by record-high oil prices and the dollar's plummet to a record low versus the euro.

The Dow Jones industrial average (up 20.81 to 13,329.20, Charts) rose a few points around 2-1/2 hours into the session, while the broader S&P 500 (up 3.52 to 1,475.01, Charts) index added 0.2 percent. The tech-fueled Nasdaq composite (up 9.75 to 2,607.22, Charts) added 0.4 percent.

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Treasury prices slipped, boosting the corresponding yields. The dollar fell to an all-time low versus the euro and was little changed versus the yen. Oil prices flirted with fresh records above $79 a barrel and gold prices slipped.

Stocks rallied Tuesday on bets that the Federal Reserve will cut a key short-term interest rate by as much as a half-percentage point when it meets next week.

Such bets continued to soothe Wall Streeters Wednesday, following choppy morning trading influenced by surging oil prices and a falling U.S. dollar.

Stocks are looking steady at the moment, but trading volume was very light, reflecting a wait-and-see attitude ahead of the Fed meeting, said Joseph Saluzzi, co-head of equity trading at Themis Trading.

"You're seeing a lot of quick, intraday moves, with people afraid to make big bets ahead of the Fed," Saluzzi said.

The choppiness is unlikely to disappear any time soon, said David Kelly, managing director and economic advisor for Putnam Investments. "This is very much a one step forward, one step back market right now."

The financial markets have been volatile this summer as investors have mulled how the credit crisis, rise in mortgage defaults and housing market collapse will hit consumer spending and the broader economy.

In other news, Treasury Secretary Henry Paulson said Wednesday that the recent market turbulence has not been caused by problems in the "real economy," but because of bad lending practices.

He also said that problems with subprime mortgages will take longer to correct than those in other financial markets because of the impact of so many adjustable rate mortgages being reset to higher levels over the next two years.

The weakness in the housing market could push the economy to near-recession levels over the next year, before growth gets back on track in 2009, according to a quarterly forecast released Wednesday by the University of California at Los Angeles.

In corporate news, Texas Instruments (down $0.29 to $35.43, Charts, Fortune 500) narrowed its earnings and revenue forecast to a range that is roughly in line with analysts' estimates. However, the company's mid-quarter update, issues late Tuesday, following Intel's more upbeat forecast earlier this week, and investors sent TI stock lower.

Amgen (up $1.95 to $55.83, Charts, Fortune 500) rose 3.5 percent in active Nasdaq trade after FDA advisors voted against requiring the company to add information about red blood cell levels to the labels of its anti-anemia drugs. The move was seen as boosting the sales potential for the drugs.

Apple (up $2.86 to $138.35, Charts, Fortune 500) shares rose after UBS lifted its price target on the company, Reuters reported.

Medical device maker Cardica (up $1.48 to $10.12, Charts) rallied more than 20 percent after it received European approval for its device that links blood vessels during heart bypass surgery.

Market breadth was mixed. On the New York Stock Exchange, winners and losers were roughly even on volume of 470 million shares. On the Nasdaq, decliners beat advancers by a slim margin on volume of 790 million shares.

Treasury prices fell, raising the yield on the 10-year note to 4.41 percent from 4.37 percent late Tuesday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell to a record lower versus the euro and was little changed against the yen.

U.S. light crude oil for October delivery rose 67 cents to $78.90 a barrel on the New York Mercantile Exchange, briefly hitting an all-time trading high of $79.29 after the government's weekly report showed a surprise drop in crude oil inventories.

Prices showed little reaction to news Tuesday that OPEC has agreed to boost its daily oil production.

COMEX gold for December delivery fell $2.90 to $718.20 an ounce.

In global trade, most Asian markets ended lower, while most European markets ended higher.