Stocks Surge in Late-Afternoon Rally

Updated from 1:56 p.m. EDT

Stocks in New York were rallying sharply Tuesday afternoon, as traders geared up for a Federal Reserve meeting and took in a series of corporate earnings reports.

The Dow Jones Industrial Average was gaining 405 points to 8581, and the S&P 500 added 40 points to 889. The Nasdaq jumped 60 points to 1566.

As Tuesday began, the Fed was set to begin deliberations on its interest-rate policy. Many investors expect the Federal Open Market Committee to reduce its target interest rate 50 basis points to 1%. Such a move would signal interest in providing the markets with capital to alleviate the ongoing credit crisis.

"Often times you see the market move, and you try to back into reasons the market moves," said Richard Sparks, senior equities analyst at Schaeffer's Investment Research. Sparks said he's inclined to believe that today's rally is a bounce within a downtrend and is not based on cheap valuations or speculation about a Fed rate cut. "Unless the rally sustains itself for a significant period ... I don't see it as being meaningful."

"The hope is we've washed out," said Chip Hanlon, president at Delta Global Advisors. "The reason the market can't rally for any lasting period is investors can't trust that that's true." He said the credit crisis could reemerge in a collapse of the commercial real estate market that historically has followed declines in residential housing.

On the other hand, said Hanlon, stocks are dramatically oversold at these levels. "They could rally at any time and the rally could be really significant. ... However, I think it's fair that investors don't trust any rally," he said. "We're not done yet."

If you liked this article you might like

China's Banks Halt Business With North Korea Per United Nations Sanctions

Bank Stocks Move Higher as Fed Decides to Start Unwinding Balance Sheet

Bank Stocks Move Higher Ahead of Federal Reserve Meeting

Morgan Stanley Is Using Snapchat to Recruit College Students and Make Them Rich

WeWork Claims Work as a Concept in Suit Against Chinese 'Copycat'