NEW YORK — A 200-point charge turned the Dow Jones industrial average positive for the year following a dismal stretch in May.
The Dow surged 235 points to 12,363 less than an hour before the closing bell. The last time the Dow gained more than 200 points was March 13.
The big jump follows weeks of losses, including a 275-point plunge last Friday set off by a surprisingly weak reading on the U.S. job market. Hope that European officials would find ways to ease the region's debt crisis helped launch the rally Wednesday. Reuters reported that Germany and European Union officials were moving quickly to find a way to rescue Spain's hobbled banks.
"It's all rumors," said Jeff Kleintop, chief market strategist for LPL Financial. "There's no real event yet."
The chatter was enough to convince some traders that the worst was over for now. Worries about Greece and Spain have helped pull the Standard & Poor's 500 index down nearly 10 percent since it peaked on April 2. "The next 10 percent move is not down, it's up," Kleintop said.
LPL has started to pull back on bets against the S&P 500 and the euro. To close a short trade against an asset, investors have to buy an asset they previously sold. "We've decided it's time to declare victory," Kleintop said.
A speech by a Federal Reserve official also added to speculation that the Federal Reserve may take more steps to bolster the U.S. economic recovery. Dennis Lockhart, president of the Fed's Atlanta regional bank, says weak job growth over the past two months highlighted the "halting and tenuous" recovery. If the trend continues, "further monetary actions to support the recovery will certainly need to be considered," he said.
Federal Reserve Chairman Ben Bernanke will likely be asked about more actions to help the economy when he testifies before a congressional committee on Thursday.
Companies whose stocks have been clobbered the most over the past month had some of the strongest gains on Wednesday. Homebuilders rallied, helped by strong earnings from Hovnanian Enterprises and rising applications for new mortgages. Hovnanian's CEO said he sees signs that the housing industry may be entering the early stages of recovery. The Mortgage Bankers Association reported that applications for mortgages rose 1.3 percent last week, largely a result of more people trying to refinance their existing loans.
Hovnanian leapt 16 percent. PulteGroup Inc. surged 6percent and Lennar Corp. 3 percent.
The gains were spread across the market. Just 15 companies in the S&P 500 dropped, and every industry group in the index rose, led by energy companies and financial firms. More than eight stocks rose for every one that fell on the New York Stock Exchange.
Jim Russell, chief equity strategist at U.S. Bank Wealth Management in Cincinnati, Ohio, said it's natural for the market to have a strong day after an extended beat-down. On such days, it's usually the companies that were hit the hardest that fare best.
"In market language, it's called a technical bounce," he said. "There's no bad news today, so the market goes up. Frankly, it's that simple."
U.S. markets followed major European indexes higher. Indexes rose 2.4 percent in the U.K. and France. Borrowing costs eased for Spain, another positive sign.
In other trading, the Standard & Poor's 500 rose 23 points to 1,309. The Nasdaq composite rose 55 points to 2,833.
The dollar dipped and Treasury yields rose as investors moved money out of defensive investments. The yield on the benchmark rose to 1.64 percent from 1.57 percent late Tuesday.
Among stocks making big moves:
— Morgan Stanley jumped 5 percent amid reports that the Blackstone Group and other private equity firms may try to buy a stake in the bank's commodities business.
— UnitedHealth Group gained 2 percent after the health insurer said it will raise its quarterly dividend from 16 cents to 21 cents per share . The board also approved a plan to buy back stock.
— Tempur-Pedic International plunged 49 percent. The mattress maker said it expects quarterly profits to fall by half compared to last year. Tempur-Pedic blamed its competitors' aggressive marketing campaigns and promotions for hurting its sales.