Stocks rally 2% on energy boost

NEW YORK (CNNMoney.com) -- U.S. stocks rallied on Wednesday, fueled by a rebounding energy sector, as investors regained confidence following the previous session's huge sell-off.

The Dow Jones industrial average (INDU) rose 225.5 points, or 2.3%. The S&P 500 index (SPX) added 28 points, or 2.6%, and the Nasdaq composite (COMP) rallied 59 points, or 2.6%.

On Tuesday, stocks ended sharply lower, with most of the decline coming in the final hour of trading as investors overlooked better-than-expected economic reports and instead worried about the global economic recovery.

"We're going to keep seeing big swings like this," said Harry Clark, CEO of Clark Capital Management Group. "It's going to be a choppy market for the rest of the summer."

Big movers: Gains were broad-based on Wednesday, with energy stocks leading the way.

All of the Oil and Natural Gas Index's 24 components posted gains, while the Amex Oil Index added 3%, with all 12 of its components also rising.

Halliburton (HAL, Fortune 500) jumped 12%, Schlumberger (SLB) rose nearly 9% and Andarko (APC, Fortune 500) added more than 5%. BP (BP) rose 3%.

On Tuesday, energy shares declined - with BP plunging 15% - after the company's latest attempt to plug the oil spill in the Gulf of Mexico failed and Attorney General Eric Holder said there would be a criminal investigation of the spill.

"BP's existence came into question yesterday," said Clark. "Investors put all the other oil companies in the same barrel with BP, but now they're realizing that BP made a mistake but the other companies are doing well."

Transocean (RIG), the operator of the Deepwater Horizon rig that exploded in the Gulf, was an exception, falling more than 3% after dropping 12% on Tuesday.

Technology shares also advanced Wednesday, with IBM (IBM, Fortune 500), Intel (INTC, Fortune 500) and United Technologies (UTX, Fortune 500) all gaining more than 2%.

"Tech has been a laggard, but now people seem to be realizing that tech stocks in general are undervalued and are good buys," said Clark.

Economy: The National Association of Realtors said its pending home sales index, a measure of sales contracts for existing homes, rose 6% in April after climbing 5.3% in March. The jump beat the 4.3% increase economists surveyed by Briefing.com had expected.

Despite the positive report, economic data has had little impact on the market recently, said Clark.

"The whole theme right now is that the market is being driven minute by minute by news, the fundamentals just don't matter," he said. "But the economy is recovering, so the market will have to eventually respond to that."

Outplacement firm Challenger, Gray and Christmas said employers announced plans to cut 38,810 jobs in May, a 1.3% rise from April's four-year low. However, job cuts were 65% lower than the same month in 2009.

Companies: General Motors and Ford Motor (F, Fortune 500) both posted large increases in May sales of the brands they retain, with GM reporting a 32% gain in sales and Ford reporting a 23% increase. Toyota Motor's (TM) sales rose 7%.

"They really helped the idea that the economy isn't falling off a cliff and that there's definitely still demand out there," said Nick Kalivas, vice president of financial research at MF Global.

Ford rose about 4% on Wednesday, while Toyota slipped nearly 1%.

The Financial Crisis Inquiry Commission held the latest in a series of hearings on the role of ratings agencies in the market collapse of 2008-2009. Warren Buffett, the widely respected investor and chief executive of Berkshire Hathaway (BRKA, Fortune 500), was among the witnesses. Several representatives of ratings agency Moody's (MCO) were also in attendance.

World markets: In Asia, Japan's Nikkei index slid 1.1% after the nation's prime minister resigned. Hong Kong's Hang Seng index edged lower.

European markets ended mostly lower, although well off the day's lows. London's FTSE 100 slipped 0.2%, Paris' CAC 40 fell 0.1% and Frankfurt's DAX was flat.

Dollar and commodities: The euro rose against the dollar to $1.2241, bouncing back from the four-year low touched the day before.

The dollar edged lower against the British pound and rose more than 1% versus the Japanese yen.

U.S. light crude oil for July delivery turned higher, climbing 28 cents to settle at $72.86 a barrel.

COMEX gold's August contract dropped $4.30 to settle at $1,222.60 per ounce.

Bonds: Treasury prices were lower, pushing the benchmark 10-year note's up to 3.34% from 3.26% late Tuesday. Bond prices and yields move in opposite directions.