(Updated from 3:17 p.m.)

The ripple effect works in both directions: On the back of gains in Asian and European markets today, the

Dow Jones Industrial Average finished the day above 10,000.

The blue-chip index -- which finished off 317 points yesterday to close below 10,000 for the first time in five months -- ended 58 higher to 10,031. The

Nasdaq Composite Index -- which yesterday finished below 2000 -- ended lower by 31 to 1941. Trading volume was light, suggesting a lack of conviction about today's market.

A day after the plunge, traders weren't surprised to see the Dow move in fits and starts. Some said they expect to witness 100-point swings on the index, as market volatility remains high.

Bob O'Hara, senior vice president of equity trading at

Jefferies

has been in the business for 35 years and thought today's market reaction to be typical. "There is the feeling that things are OK today," he said. "But the markets had a lot to digest, and people are looking for direction -- waiting to see what develops."

Shares of financial stocks, dragged lower yesterday by news that international credit rating agency

Fitch

had put 19 Japanese banks on a negative review, were bouncing off their lows today. The

Philadelphia Stock Exchange/KBW Bank Index

was earlier moving ahead 2.5%.

Citigroup

(C) - Get Report

earlier tacked on 2.9% to $46.21, while

J.P. Morgan Chase

(JPM) - Get Report

rose 3.2% to $45.21.

To be sure, many traders were cynical about today's gains. "The market is meeting rallies with suspicion," said Mike Driscoll, director of listed trading at

Credit Suisse First Boston

. "We're trading very bearishly, which is to say selling the rally instead of buying the dip."

After swinging in a 700-point range, Tokyo's

Nikkei 225

surged to close up 2.6% at 12,153. Market experts speculated the Asian recovery overnight might have been driven by news that Japanese bank

UFJ Holdings

doubled its loan loss provisions in response to growing fears about loan defaults, as well as reports the Japanese government might set up a fund to cover investor losses. The Nikkei fell to a 16-year low early this week. Hong Kong also recouped recent losses, and the

Hang Seng

closed 1.2% higher to 13,504.2.

Good news from one of the alleged protagonists of yesterday's selloff,

Nokia

(NOK) - Get Report

, helped keep telecom stocks afloat in afternoon trading.

This morning, the cell phone maker, had been up a whopping 14% to $24.85, cut its first-quarter handset sales projections but kept its earnings targets intact and said profit margins would be up. Conflicting rumors about Nokia have emerged in the past few weeks, but yesterday the buzz was decidedly negative and helped send overseas markets lower.

Nokia's principal rivals were moving higher on the news.

Ericsson

(ERICY)

rose 1% to $5.31, while

Motorola

(MOT)

advanced 2.2% to $14.80. Both companies issued warnings about their upcoming quarters earlier this week.

Shortly after Nokia "warned" this morning, European indices reversed course to move into the green. London's

FTSE

finished up 42 points, or 0.7%, to 5668. Germany's

Xetra Dax

ended 69 points higher, or 1.2%, to 5864. And Paris'

CAC 40

closed up 42 points, or 0.8%, to 5158.

Negative news today has done little to keep stocks down. J.P. Morgan cut its estimates and price targets on storage company

EMC

(EMC)

; it was gaining 2.9% to $36.27. Elsewhere,

Lehman Brothers

cut its estimates and price target on burger king

McDonald's

(MCD) - Get Report

, recently off 2.7% to $26.79. And

Nextel

(NXTL)

was lower by 3% to $14.12 after it cancelled the initial public offering for its international unit.

Another chip for the bulls this afternoon:

Expectations are growing at a fast clip that the

Federal Reserve will cut interest rates by 75 basis points instead of only half a percentage point when it meets next Tuesday.

Yesterday's release of the January

business inventories helped bolster that theory. The report showed inventories for the month were way above economist expectations with a 0.4% rise -- a sign that inventories continue to grow sharply and demand continues to stumble. Rising inventories have been named as a key concern for the slowing economy, and the steeper the slowdown, the more the Fed will likely be encouraged to cut rates to help get the economy back on its feet. Inventories for December were revised higher -- to unchanged from initial estimates of a 0.1% rise.