Traders on the floor of the New York Stock Exchange just before the closing… (JUSTIN LANE, EPA )
The stock market jumped to its biggest gain of the year on hope that European policymakers will take steps to boost their sagging economies and address their debt crisis.
The Dow Jones industrial average rose 286.84 points, or 2.4%, to 12,414.79 on Wednesday. The advance pushed the blue-chip index back into positive territory for the year.
Coming on the heels of a small advance Tuesday, the Dow rose on consecutive days for the first time since late April.
The Standard & Poor's 500 index climbed 29.63 points, or 2.3%, to 1,315.13, and the Nasdaq composite index moved up 66.61 points, or 2.4%, to 2,844.72.
The market's decline over the last two months was driven by fear of a slowing U.S. economy and a re-acceleration of the debt crisis in Europe.
Investors were comforted Wednesday by the Federal Reserve's "beige book" report, which indicated that the U.S. economy was experiencing moderate but steady growth.
Stocks also got a boost from Home Depot Inc.'s announcement that it would increase its stock buyback by $500 million to $4 billion. Its shares rose $1.68, or 3.4%, to $50.60.
"It was the combination of hopeful signs abroad and some positive news at home" that boosted the market, said Jack Ablin, chief investment officer of Harris Private Bank in Chicago.
"Almost the opposite of last Friday," he said, when a disappointing unemployment report intensified economic anxiety.
Still, few investors expect the market to continue to advance strongly without clear signs of an economic upswing.
"We can squeeze a little more toothpaste out of the tube, but I'm not looking at this as an impetus for a multiyear bull market," Ablin said.
Investors were encouraged by comments by Mario Draghi, president of the European Central Bank, suggesting that policymakers may take action to address the continent's debt woes. Among the possibilities is more coordinated economic policies among the countries in the Eurozone.
Among other things, European politicians are trying to find a way to help debt-ridden Spanish banks whose books are weighed down by bad real estate loans. Rates on Spanish government bonds have jumped significantly in the last two months, making it difficult for that government to raise enough money to finance itself and aid its financial institutions.
"We monitor all developments closely and we stand ready to act," Draghi said to reporters.
But Germany has consistently resisted calls for it to provide financial backing to weaker Eurozone members, saying other countries need to stick to the strict austerity measures adopted in the last year.
The stock market will swing back and forth based on the perceived progress in Europe, said Paul Hickey, co-founder of investment research firm Bespoke Investment Group in Harrison, N.Y.
"You can't make too much of any of the comments [from European leaders] because they change every day," Hickey said.