Wall Street losses reversed

Wall Street surged in a volatile session today, reversing losses incurred on Friday.

The move comes even as investors wrestled with credit concerns ahead of tomorrow’s Federal Reserve meeting.

Investors have been searching for signs of where the economy and the markets are heading after the fractious trading of the past two weeks.

In a day devoid of economic news and with few earnings reports, investors early in the session seemed to avoid making big bets, though stocks later gained steam after midday.

The run-up comes ahead of the Fed’s meeting on interest rates tomorrow. Policymakers are widely expected to hold the benchmark rate steady at 5.25%; as usual, the greater concern is with the Fed’s economic assessment statement.

This time, investors will be looking to see what the Fed says about credit. According to preliminary calculations, the Dow Jones industrial average soared 286.87, or 2.17%, to 13,468.78, after zigzagging throughout much of the session.

Broader stock indicators also rebounded. The Standard & Poor’s 500 index rose 34.57, or 2.41%, to 1,467.63. The Nasdaq composite index rose 36.08, or 1.44%, to 2,547.33.

"I think a lot of it has to do with people sort of squaring up before the Fed on the short side, covering some shorts. I really wouldn't read too much into it,'' said Charles Norton, principal and portfolio manager at GNICapital, referring to the market's move higher and investors who sell stocks ``short,'' betting that they will fall.

Such investors can be forced to buy stock to cover their positions if they believe the market is poised to move higher.

The rally was not as widespread as the rise in the major indexes suggested, though. Advancing issues outnumbered decliners by about 6 to 5 on the New York Stock Exchange, where volume came to 2.28 billion shares, compared with 2.11 billion shares traded on Friday.

Falling oil also gave a boost to stocks. Light, sweet crude futures tumbled 3.42 dollars to 72.06 dollars a barrel on the New York Mercantile Exchange. Gold prices fell, while the dollar moved in a mixed range against other major currencies.

Stocks have endured a volatile couple of weeks as troubles in the global credit markets – rooted in the rise of subprime loan defaults in the US – have unfolded. Some investors are concerned that bad subprime loans, those made to borrowers with poor credit, remain on the books of some financial companies and have yet to be disclosed.

“The shorts have had such tremendous success in the past few weeks in keeping this market down it’s now oversold. The fact is that no one really knows what the Fed will might say – or do for that matter,” Norton said.