Stocks try to extend gains

NEW YORK (CNNMoney.com) -- Stocks inched higher Wednesday morning, but gains were tentative following the previous session's rally, Wall Street's biggest advance of the year.

The Dow Jones industrial average (INDU) gained 66 points, or 1%, in the early going. The S&P 500 (SPX) index added 9 points, or 1.3%. The Nasdaq composite (COMP) picked up 17 points, or 1.3%.

On Tuesday, stocks surged after a Citigroup (C, Fortune 500) memo said the beleaguered bank was profitable in January and February, and amid talk that the government may reinstate a restriction on short-selling. The Dow rallied 379 points, the biggest gain of 2009, a day after finishing at a 12-year low.

Art Hogan, chief market strategist at Jefferies & Co., said it would be no surprise if the stock markets could maintain a second day of gains, considering their oversold position after three weeks of declines.

"I certainly thing it's a positive, but we've got a long way before we can call it a trend," said Hogan.

But he added that the makings of a trend are there. "There is a creeping sense that there is stability coming back into the markets, albeit at extremely stressed levels," he said.

Robert Brusca, chief economist at Fact and Opinion Economics, said Wednesday's gain in the futures markets "increases the credibility of yesterday's rally" and he believes that the markets have hit their bottom.

"My hypothesis is that this is the beginning of a [prolonged] rally, because the market is oversold," said Brusca, who hopes that traders and economists will shed their "amazing and relentless pessimism."

But Len Blum, managing director at the investment bank Westwood Capital LLC, was more cautious in his assessment of the markets.

"Fear is prevalent enough that you're not going to get a sustained rally unless there's some clear evidence that banks are again willing to lend, that troubled assets are under control, and that there's a bottom to the real estate market," said Blum.

Asian markets joined the rally Wednesday, with Tokyo's Nikkei surging 4.6% to bounce off a 26-year low. In afternoon trading, the European indexes were mostly higher, although the FTSE index in London slipped by 0.3%.

Financial shares continued to rally for a second session. Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500), Wells Fargo (WFC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Goldman Sachs (GS, Fortune 500) were among the gainers.

Economy: The February Treasury budget will be released at 2 p.m. ET. A deficit of $205 billion is expected, according to a consensus of analyst opinions from Briefing.com.

The government's weekly crude inventories report comes out at 10:30 a.m. ET. Analysts expect a draw down of 1 million barrels in U.S. commercial crude oil stocks, according to a survey by energy research firm Platts.

In Washington, the congressional oversight panel is due to release a report on the Troubled Asset Relief Program (TARP), the bank bailout plan.

Oil and money: Oil fell $1.25 to $44.46 a barrel on the New York Mercantile Exchange. The dollar slipped versus the euro, the yen and the British pound.