A late afternoon surge pushed stocks higher for the third day straight. The Dow Jones industrial average finished with a gain of 144 points Wednesday, but only after veering much of the day from gains to losses and back again.
Gold plunged $104 an ounce and government bond yields rose as investors became less fearful.
An encouraging rise in orders for cars, aircraft and other long-lasting goods in July helped ease worries that the U.S. was headed for another recession. The government said durable goods orders rose 4 percent, the biggest increase since March. Orders fell in June.
The stock market spent most of the day looking like a driver given bad directions. The Dow headed lower at the start of trading, turned up 115 points by 10 a.m., then pulled another U-turn and was down 48 points shortly after midday.
Near the end of the day, the Dow retraced its route and rose steadily in the last 90 minutes of trading to end up 143.95 points, or 1.3 percent, at 11,320.71. The Dow had surged 322 points the day before, the biggest gain since Aug. 11.
The Standard & Poor's 500 index rose 15.25 points, or 1.3 percent, to 1,177.60. The Nasdaq rose 21.63, or 0.9 percent, to 2,467.69.
The yield on the 10-year Treasury note jumped to 2.29 percent from 2.15 percent late Tuesday. The yield had fallen below 2 percent last week, a record low, as investors piled into lower-risk assets. Bond yields fall when demand for them rises.
Large swings in the stock market have been commonplace this August. In the week after Standard & Poor's stripped the U.S. of its AAA rating Aug. 5, the Dow alternated between 400-point gains and losses four days in a row. That had never happened before.
The stock market often takes sudden turns in late August anyway, because fewer traders are at their desks, said Dan Greenhaus, chief global strategist at the brokerage BTIG. Lower trading volumes often make for a more volatile market.
"It's kind of crazy. I blinked and in 15 minutes the market had turned," Greenhaus said. "But in the last two weeks of August, wild swings like this are not out of the ordinary."
Another reason for the recent jumpiness is the debate over the possibility of another U.S. recession. Investors have said they're weighing each economic report for evidence. In this climate, weak economic figures can look encouraging if they're not as bad as most people had feared, Greenhaus said.
Weak economic data can also be seen as a call for the Federal Reserve to announce another rescue effort for the economy, said Abigail Huffman, head of research for Russell Investments. Many investors hope Fed Chairman Ben Bernanke will offer some help when he speaks at a conference on Friday. It was at that same meeting last year that Bernanke made the case for the Fed buying Treasury bonds to lower interest rates and spur spending. That $600 billion bond-buying program, known as QE2, ended in June.
Huffman and other strategists think the Fed is unlikely to start another large bond-buying program. Another stimulus program would risk stoking inflation. "There's a pretty high bar for QE3," she said.
Two days after trading above $1,900 an ounce for the first time, gold fell $104 to $1,757 an ounce as investors became less skittish about holding stocks. Gold lost $30 Tuesday.
Bank of America Corp. rose 11 percent, the most of any stock in the Dow average, after analysts said a four-day slide that erased 15 percent of the bank's value had been overdone. Toll Brothers rose 4.6 percent after the homebuilder reported quarterly income that trounced analysts' estimates.
Indexes jumped sharply Tuesday as investors brushed off a pair of weak economic reports and an earthquake that shook the East Coast. The Dow has recovered 503 points in three days after a four-week losing streak. Even after this week's rally, the Dow remains 11 percent below the recent peak it reached on July 21 and is down 2 percent this year.
The S&P 500 index, the measure used by most money managers, has surged 4.8 percent this week. It's still down 8.9 percent in August and 10.8 percent for the year.