"This market for the last three to four weeks has shown an impressive ability to look past negative news. I think each time it does that, it gives investors increasing confidence that direction in the near term is up," said Brian Bush, director of equity research at Stephens Inc.

The Dow Jones industrial average rose 58.47, or 0.7 percent, to close at 8,427.41, according to preliminary calculations, having inched up 0.90 yesterday. Earlier in the day, blue-chip stocks dropped as much as 61 points and climbed as high as 90 points.

The market's broader gauges also finished higher. The Nasdaq composite index climbed 26.05, or 2 percent, to 1,326.59. The Standard & Poor's 500 index gained 8.54, or 1 percent, to 890.69.

Despite the uneven trading, analysts said investor sentiment appeared to be improving after pessimism about the economy and corporate profits drove the Dow to a five-year low on Oct. 9. Since then, blue chip stocks have risen more than 1,100 points.

They cited in particular the market's reaction to a report yesterday showing consumer confidence tumbling to its lowest level since 1993.

Stocks initially dropped sharply before rebounding at the close.

"I think what investors are liking is the momentum the market had the last three-and-half weeks," said Alfred E. Goldman, chief market strategist at A.G. Edwards & Sons Inc. "The market bent (yesterday), but it didn't break.

"So there was a lot of sideline cash that figured something was going on here, and saying, 'I better own stocks,"' he said.

Wal-Mart dropped $2.67 to $53.80 after Goldman Sachs downgraded the company's stock rating to "market performer," suggesting it won't continue to outperform the sector as the economy improves.

Analysts say the market remains vulnerable to profit-taking as investors question stocks' long-term strength. Investors also want to see more economic data, such as October employment figures, which will be released Friday.

"I wouldn't be surprised to see a little bit of a selloff, such as short-term traders in the event we get a bad unemployment number," Bush said. "But the market psychology right now just seems to be very positive."

Exxon Mobil gained 85 cents to $34.08 on higher oil prices prompted by reports showing U.S. products inventories fell last week.

Citigroup rose 58 cents to $37.08 after the financial services company said it will separate its stock research from its investment banking operation to appease securities regulators who looking into possible conflicts of interest.

TXU jumped $1.78 to $14.60 after the energy company reported third-quarter earnings of 92 cents, beating Wall Street's expectations by 2 cents.

Losers included Tommy Hilfiger, which dropped $1.85 to $7.50, after the fashion company warned that earnings for the rest of the year will fall short of Wall Street's expectations. The company also said it will close 37 of its 44 U.S. stores.