Wall Street manages gains

ROAD TO RESCUE

• Home prices up for 1st time in 3 years
• New home sales: 'Really good news'
• Wall Street: Here comes the hard part
• 7 regional banks fail
• Banker: "TARP helped avert a global calamity"

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NEW YORK (CNNMoney.com) -- Stocks gained Wednesday, mustering up a late-session rally after a choppy session that helped push the S&P 500's two-week gains to 20%.

The Dow Jones industrial average (INDU) rose 90 points, or 1.2%. The S&P 500 (SPX) index rose 7 points, or 0.9%. The Nasdaq composite (COMP) rose 12 points, or 0.8%.

Stocks spiked in the morning on better-than-expected readings on new home sales and durable goods orders, but the advance sputtered out through most of the afternoon. A late-session jump in financial stocks and tech shares helped markets finish higher.

Joseph Saluzzi, co-head of equity trading at Themis Trading, said that the market is having trouble as it is bumping up against some key resistance levels around 820 or 825. He said that the perception of a weak 5-year Treasury auction was also having an impact Wednesday.

Stocks have bounced 20% since March 9th, when the Dow and S&P 500 hit roughly 12-year lows.

Equities have been rallying on optimism that the economy and financial markets are getting closer to stabilizing. In addition, many stocks have been hammered so heavily as to make them attractive to investors again.

But that advance has been losing steam, particularly after Monday's spike of roughly 7% for the major stock gauges, said Christopher Colarik, portfolio manager at Glendmede.

"There's meaning behind the rally,and I do think we've seen the lows, but the bottoming process is going to take time," he said.

Thursday preview: The House Financial Services Committee holds a hearing on regulatory reform, with Treasury Secretary Tim Geithner due to testify.

Economic reports include readings on weekly jobless claims and gross domestic product growth.

The number of Americans filing new claims for unemployment is expected to have risen to 650,000 from 646,000 the previous week, economists estimate. Continuing claims, a measure of people who have been receiving unemployment for a week or more, will also be in focus. Last week, continuing claims hit an all-time high of 5.473 million.

Fourth-quarter GDP is expected to have shrunk by a 6.6% annual rate versus the previous reading of a 6.2% rate. The 6.2% rate was a 26-year low.

Best Buy (BBY, Fortune 500) and homebuilder Lennar (LEN, Fortune 500) report quarterly results before the start of trading.

Bank focus: Stocks overall followed financials, with the broad market retreating in the afternoon along with bank stocks and recharging in the late afternoon as the sector found its footing.

"We're again being led by the financials," Themis Trading's Saluzzi said. "If they break down, the market breaks down."

Bank of America (BAC, Fortune 500), JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) ended higher after a shaky afternoon. Citigroup (C, Fortune 500) cut some losses. The KBW Bank (BKX) sector index rose 5%, erasing a drop of over 5%.

Market breadth was positive. On the New York Stock Exchange, winners beat losers seven to three on volume of 1.77 billion shares. On the Nasdaq, advancers topped decliners by over two to one on volume of 2.5 billion shares.

Economy: A pair of better-than-expected economic reports added to optimism that the economy is getting closer to stabilizing.

February new home sales rose at an annual unit rate of 337,000 versus a revised 322,000 in the previous month. Sales were expected to rise at a 300,000 unit annual rate, according to a consensus of forecasts from Briefing.com.

An earlier report showed that durable goods orders rose 3.4% in February after falling 5.2% in the previous month. Economists surveyed by Briefing.com thought orders would fall 2.5%.

Durable goods orders excluding transportation rose 3.9% after falling 5.9% in January. Economists thought they would fall 2%.

Also, a report from the UCLA Anderson School of Management showed that real domestic product growth is on track to see quarterly growth in 2010 and 2011, although not in 2009.

Washington: On Tuesday, Federal Reserve Chairman Ben Bernanke and Secretary Geithner testified about the government's $180 billion bailout of American International Group. They said AIG (AIG, Fortune 500) demonstrates the need for the government to have broader power over non-bank financial institutions.

Geithner again made his case for broader powers to regulate flailing companies on Wednesday. In a speech in New York, the Treasury Secretary said that the country should never again have to provide a massive bailout or risk seeing a collapse of the financial system.

President Obama, in a primetime news conference Tuesday, said that it is because of a lack of authority that the AIG situation has gotten worse. Obama also defended his $3.6 trillion 2010 federal budget, which he said is "inseparable" from the overall strategy for economic recovery.

Congressional committees began debating the budget Wednesday, with a final budget not expected until at least next fall.

On Monday, Treasury introduced its plan to purge bank balance sheets of up to $1 trillion in bad assets that are limiting lending and prolonging the recession.

Bonds: Treasury prices tumbled, raising the yield on the benchmark 10-year note to 2.79% from 2.70% Tuesday. Treasury prices and yields move in opposite directions.

Lending rates were unchanged. The 3-month Libor rate held steady at 1.23%, where it stood Monday, while the overnight Libor rate held steady at 0.29%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.

Last week, the Federal Reserve announced it was pumping another trillion into the economy to try to get credit flowing, including $300 billion to buy long-term Treasurys. The N.Y. Fed Bank began buying the securities Wednesday.

Other markets: In global trading, Asian markets ended lower and European markets ended higher.

In currency trading, the dollar fell against the euro and the yen, recovering from bigger morning losses following comments from Treasury Secretary Geithner.

U.S. light crude oil for May delivery fell $1.21 to settle at $52.77 a barrel.

COMEX gold for May delivery rose $12 to settle at $936.70 an ounce.