Stocks recharge the advance
Tech-fueled Nasdaq leads the rally at the end of a choppy session. Pulte-Centex merger and insurers in focus.
NEW YORK (CNNMoney.com) -- Stocks rallied Wednesday at the end of a choppy session as a housing sector merger and more optimism about the recovery overshadowed sinking bank shares and the Fed's dour economic forecast.
Investors seemed to take in stride Alcoa's glum start to what is expected to be a dismal quarterly results reporting period.
The Dow Jones industrial average (INDU) gained 47 points, or 0.6%. The S&P 500 (SPX) index rose 9 points, or 1.2%. The Nasdaq composite (COMP) gained 29 points, or 1.9%.
Stocks slipped Monday and Tuesday following a four-week advance that sent the Dow and S&P 500 spiking more than 20% off 12-year lows. But after the brief retreat, investors managed to restart the advance Wednesday.
The market likely bottomed on March 9, said Timothy Ghriskey, chief investment officer at Solaris Asset Management. Yet, the next six months are bound to be choppy as investors try to factor in an eventual recovery.
"The selloff in February into early March was driven by speculation about the most dire outcomes for our economic systems," Ghriskey said. "That level of panic usually signals a bottom."
"We've recovered very quickly over the last month from that correction and we're on pretty solid footing here," he said. "But we're likely to remain in a holding pattern until we have more clarity on the recovery."
Stocks briefly cut gains after the release of the minutes from the Federal Reserve policy meeting last month, when central bank policymakers opted to keep interest rates at levels near zero.
The bankers forecast a delay in the economic recovery until 2010, instead of the second half of this year. The bankers also thought the unemployment rate would rise more steeply into 2010.
Thursday preview: March sales from the nation's retailers are due through the morning. Sales improved in February after four straight months of declines, but investors will be looking to see if the consumer is continuing to hang in despite the recession.
The government releases the February trade balance and the weekly jobless claims report before the start of trading, along with the March report on import and export prices.
Thursday is also Passover, although many celebrations begin the night before. Financial markets are open Thursday, but trading volume is expected to be light ahead of Good Friday, when all markets are closed.
Homebuilders: Pulte Homes (PHM, Fortune 500) is buying Centex (CTX, Fortune 500) in a $3.1 billion deal - including debt - that creates the nation's largest homebuilder. The deal gave a boost to a number of other companies in the sector, including Lennar (LEN, Fortune 500) and Hovnanian Enterprises (HOV, Fortune 500).
Insurers: The sector got a lift from a published report that said Treasury will let certain insurers receive aid from its Troubled Asset Relief Program (TARP). Gainers included Hartford Financial (HIG, Fortune 500), Genworth Financial (GNW, Fortune 500) and Lincoln National (LNC, Fortune 500).
Earnings: Alcoa (AA, Fortune 500) reported a first-quarter loss of 59 cents per share after the close Tuesday, wider than the loss of 56 cents per share analysts were expecting. The aluminum maker earned 44 cents a year earlier.
Revenue fell to $4.1 billion from $7.375 billion a year ago, versus forecasts for a bigger drop to $4.08 billion. Alcoa is typically the first Dow component and major company to report results each quarter. Shares gained 3.5% Wednesday.
Bed Bath & Beyond (BBBY, Fortune 500) reported weaker quarterly earnings that beat forecasts on lower revenue that met estimates. Shares jumped over 24%.
Market breadth was positive. On the New York Stock Exchange, winners topped losers by almost three to one on volume of 1.32 billion shares. On the Nasdaq, advancers topped decliners by over two to one on volume of 1.86 billion shares.
Short-selling rules: The advance was set back following reports that regulators are recommending restrictions on all short-selling, not just on financial shares, as had previously been thought.
The stock market got a boost last month on talk that the Securities and Exchange Commission would reinstate the uptick rule - that limits short-selling - on financial shares. Critics have said the absence of the rule has exacerbated the selloff in bank stocks.
Economic news: February wholesale inventories fell 1.5% versus forecasts for a drop of 0.7%. Inventories fell 0.7% in the previous month.
Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.88% from 2.91% Tuesday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian markets ended lower and European markets finished mixed.
In currency trading, the dollar fell versus the euro and the yen.
U.S. light crude oil for May delivery settled up 23 cents at $49.38 a barrel on the New York Mercantile Exchange. Prices slipped in the morning, but turned around after the government's weekly energy report showed crude supplies increased less than expected.
COMEX gold for June delivery rose $3.40 to settle at $885.90 an ounce. 
