Stocks Soar More Than 2%, Finish at Session Highs

NEW YORK ( TheStreet) -- The major U.S. equity indices finished Wednesday's powerful 2%-plus rally on a high note as investors flooded into stocks on the hope that the Federal Reserve could soon signal its openness to another round of quantitative easing.

The major U.S. equity indices were also getting a lift from some short-covering following the deep declines seen since the start of May and a better than expected GDP report from Australia, according to Robert Pavlik, chief market strategist at Banyan Partners.

The Dow Jones Industrial Average gained 287 points, or 2.4%, to close at 12,415. The move puts the blue-chip index back in the black for the year (up 1.6%) after it went negative during last Friday's steep selloff following the weak May jobs report.

The S&P 500 jumped nearly 30 points, oe 2.3%, to settle at 1315. The Nasdaq rose 67 points, or 2.4%, to close at 2845.

All three indexes finished at their session highs. The S&P 500 is now up 4.6% in 2012, and the Nasdaq has gained 9.2%.

Fed Chairman Ben Bernanke is slated to appear on Capitol Hill Thursday, and Wall Street is betting that he hints that the central bank is amenable to providing additional monetary stimulus with Operation Twist slated to end later this month.

Announced in September 2011, Operation Twist involves selling short-term bonds and buying long-term ones. The current $400 billion program expires this month but Federal Reserve Bank of Atlanta President Dennis Lockhart said Wednesday an extension was an option.

Pavlik said there could be more upside ahead in the short term but also noted that headline risk from Europe remains a constant worry, saying he would be "extremely cautious heading into next week" with the Greek elections looming toward the end of the month.

"While the recent talk from financial leaders has been in-line with what the Street wants to hear as it relates to 'what they'll to do' to safeguard the banks and financial systems in Europe; keep in mind that nothing other than an agreement to keep talking and to try and formulate a plan has actually been decided upon," he wrote in emailed commentary on Wednesday. "What this means is, we still have no concrete understanding what the finance ministers will do or if they'll be ready if the debt crisis worsens."

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