Stocks lift Wed. on slipping oil prices

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NEW YORK -- Wall Street advanced in choppy trading Wednesday, extending the huge rally a day earlier that was triggered by the Federal Reserve's plans to pump liquidity into distressed financial markets.

An Energy Department report showing an unexpectedly large increase in crude oil supplies last week also helped calm investors. If rising inventories help oil prices pull back from record levels, inflation pressures should ease -- which would give the Federal Reserve greater opportunity to lower interest rates and boost lending efforts to spur the economy. Crude oil fell back below $108 a barrel on the New York Mercantile Exchange, after reaching a trading record of almost $110 a barrel the day before.

The Dow Jones industrial average was up more than 80 points after surging 416 points Tuesday, the blue chips' biggest one-day point gain since 2002. The tone in markets around the world has clearly improved as investors appear hopeful the Fed's plan can help jump-start the moribund credit markets. The Fed said Tuesday it would lend Treasurys in exchange for mortgage-backed securities and other battered debt that all but collapsed in the subprime mortgage crisis.

Wall Street largely regarded the Fed's plan -- conducted alongside other big central banks outside the U.S. -- as an innovative way to bring relief to the credit markets without simply further cutting interest rates and risk sparking inflation. But there's no guarantee the recent market optimism will stick.

"We're still in a great deal of flux here. The fact that the Fed has gone from lender of last resort to lender of first resort worries me," said John O'Donoghue, co-head of equities at Cowen & Co.

In midday trading, the Dow Jones industrial average rose 84.26, or 0.69%, to 12,241.07. It had initially dipped, shot up more than 140 points, then pared its gains.

Broader stock indicators also recovered from an early decline. The Standard & Poor's 500 index rose 4.65, or 0.35%, to 1,325.30, and the Nasdaq composite index rose 17.32, or 0.77%, to 2,273.08.
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