updated 9/11/2008 7:39:19 AM ET 2008-09-11T11:39:19

Stocks rallied Wednesday, but ended trading with moderate gains a day after a steep sell-off. Investors took positions in sectors such as energy, materials and consumer staples.

Major Market Indices

Financial shares were mixed as investors digested Lehman Brothers Holdings Inc.’s plans to try to sell a majority stake in its investment management business and spin off its troubled mortgage assets.

The market’s gains come a day after unease about Lehman touched off widespread selling on worries that the No. 4 U.S. securities company had few options to raise capital. The already beaten down stock lost nearly half its value Tuesday as investors grew fearful that the company would succumb to soured mortgage debt and other financial difficulties.

Bargain-seeking investors often pick over hard-hit stocks after big pullbacks, so some buying wasn’t surprising Wednesday. Investors bought up energy names after declines logged Tuesday and looked to defensive areas like consumer staples.

But investors also focused on the financial sector after Lehman said it is trying to hammer out an agreement to sell a majority stake in its prized investment management arm and spin off a real estate unit.

Lehman shares rose 45 cents to $8.24 in afternoon trading after tumbling 45 percent Tuesday.

“They’re trying to buy time but it’s very dangerous on Wall Street to buy time. You need to be able to do business,” Axel Merk, portfolio manager at Merk Funds, said of Lehman’s plans. “I don’t think we’re at the end of the financial problems in the markets.”

Unofficial closing figures showed the Dow Jones Industrials rose 39.19, or 0.34 percent, to 11,268.92.

Broader stock indicators also rose. The Standard & Poor’s 500 index rose 7.53, or 0.61 percent, to 1,232.04, and the Nasdaq composite index rose 18.89, or 0.85 percent, to 2,228.70.

The Dow fell 2.4 percent Tuesday, essentially erasing big gains logged Monday, while the S&P 500 fell 3.4 percent and the Nasdaq composite index lost 2.6 percent.

Bond prices fell after a run-up Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.64 percent from 3.59 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices fell.

Oil fell in fractious trading as strength in the dollar and indications of a weakening economy overshadowed OPEC’s decision to cut back excess production. Light, sweet crude fell 6 cents to $103.20 per barrel on the New York Mercantile Exchange.

Wall Street has grappled with intractable worries about the financial sector since the near-collapse and subsequent sale of Bear Stearns Cos. in March. Banks such as Lehman have struggled in the past year with unwieldy amounts of mortgage-backed securities and other risky investments on their books that have plunged in value.

Many Wall Street observers contend the stock market will not be able to carve out a sustained recovery until investors can determine the scale of losses in the financial sector. Global banks have written off more than $300 billion in bad investments.

“There’s always hope every time one of these shoes drops that it’s the last shoe and that lasts for a day,” said Ron Kiddoo, chief investment officer at Cozad Asset Management, pointing to Wall Street’s about-face Tuesday when relief over a government bailout of mortgage lenders Fannie Mae and Freddie Mac gave way to fresh worries over Lehman.

“You get the feeling that they don’t really all know where the problems are,” he said. “We need a quarter with these financial companies where they’re not doing all these big write-offs.”

Washington Mutual Inc. fell 65 cents, or 20 percent, to $2.66 after credit ratings agency Standard & Poor’s Ratings Services reduced its outlook on the company.

In the energy group, Exxon Mobil Corp. rose $2.01, or 2.7 percent, to $75.27, while Chevron Corp. advanced $2.30, or 2.9 percent, to $81.09.

Freeport McMoran Copper & Gold Inc. rose $4.06, or 6.2 percent, to $69.22 among materials companies.

Consumer staples companies such as Wal-Mart Stores Inc. advanced. The stock rose $1.17 to $62.30 after setting a new 52-week high of $62.48; the previous high was $62.36.

FedEx Corp. rose $3.84, or 4.5 percent, to $88.59 after the package delivery company said it expects its fiscal first-quarter profit will top its own forecast because of lower fuel costs and efforts to trim expenses.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 913.1 million shares.

The Russell 2000 index of smaller companies rose 12.27, or 1.78 percent, to 719.56.

Overseas, Japan’s Nikkei stock average fell 0.44 percent. Britain’s FTSE 100 fell 0.91 percent, Germany’s DAX index declined 0.37 percent, and France’s CAC-40 fell 0.23 percent.

© 2013 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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