Stocks move higher after 5 days of heavy selling

NEW YORK — The stock market is showing signs of life as investors find glimmers of hope for an economic turnaround.

Stocks rallied Wednesday after a week of heavy selling on word of a possible Chinese economic stimulus package and an Obama administration plan to help struggling homeowners. A slightly better-than-expected report on the services sector also helped. All the major indexes rose more than 3 percent.

The advance followed a week of unrelenting selling that has left major indexes plunging to levels not seen in more than a decade.

"Virtually everyone was expecting some sort of a bounce, we just didn't know exactly when that would occur," said Randy Frederick, director of trading and derivatives at Charles Schwab. "You can't go down forever."

Investors were encouraged by details of a government program designed to help as many as 9 million borrowers stay in their homes through refinanced mortgages or loans that are modified to lower monthly payments.

Wall Street followed the lead of overseas markets, which rallied on optimism over a possible Chinese economic stimulus plan. Prices for oil and other commodities also climbed.

The Institute for Supply Management, a trade group of purchasing executives, said its services index fell to 41.6 last month from 42.9 in January, slightly above Wall Street's estimate of 41. Any reading above 50 signals growth.

Investors showed relief after release of the Federal Reserve's beige book, an assessment of the U.S. economy by region. The central bank said the economy has slowed further in the last two months and that the outlook for a quick recovery is bleak. Investors were relieved it wasn't worse. There were some bright spots: companies that make pharmaceuticals and biotechnology products are seeing demand increase.

In midafternoon trading, the Dow Jones industrial average rose 221.82, or 3.3 percent, to 6,947.84. The Standard & Poor's 500 index added 23.28, or 3.3 percent, to 719.61, while the Nasdaq composite index gained 42.00, or 3.2 percent, to 1,363.01.

The Russell 2000 index of smaller companies rose 11.75, or 3.3 percent, to 372.76.

Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 1.1 billion shares.

Industrial and commodity-related stocks led the market higher as oil prices jumped on hopes for the Chinese stimulus.