NEW YORK — It started with another stomach-turning drop at the open, and a loss of more than 300 points by midday. Then stocks changed course, raced higher and closed with a dramatic gain of nearly 300.

This wasn't just volatility. This was Wall Street whiplash.

Amid tumbling housing prices, an ongoing credit crisis and growing fears of a recession, turbulence has become a hallmark of Wall Street in recent weeks. And after five straight days of pullbacks, analysts saw some positive signs in Wednesday's trading.

Investors certainly found a reason to buy, perhaps encouraged by the Federal Reserve's unprecedented 0.75-point interest rate cut a day earlier and a widely held bet on another half-point cut next week.

By day's end, the Dow had swung 631.86 points from its low point to its high _ the largest single-day turnaround in more than five years.

"You might say this is a belated reaction to what the Fed did this week, compounded by hopes for the Fed to do more next week," said Peter Cardillo, chief market economist at Avalon Partners.

The Dow had plunged more than 465 points just after the opening bell Tuesday as the market digested news of the rate cut. But stocks rallied to finish down just 128, then tacked on a 2.5-percent gain on Wednesday.

The Dow Jones industrial average finished the day up 298.98 at 12,270.17. It had been down 323.29 at its low point.

The swing from negative to positive territory of 631.86 points was the largest point move since July 24, 2002, according to Dow Jones Indexes. The largest intraday point swing, a metric that Dow started calculating in 1995, was a 721-point swing on April 14, 2000.

"Volatility is certainly the norm now and not the exception," said Art Hogan, chief market strategist at Jefferies & Co.

He noted that all but two trading days this year had seen triple-digit swings in the Dow, three of them 300 points.

On Wednesday, traders who bet on the Fed's target fed funds rate were pricing in a 100 percent chance of a 0.50-percentage-point cut by the central bank when it meets next Tuesday and Wednesday.

Rate cuts are designed to stimulate borrowing and, in turn, business activity and the overall economy. They also will eventually boost profit margins for banks and other lenders, which have been working to lower costs and raise cash levels through layoffs and stock sales after having lost billions of dollars to bad mortgages and mortgage-related investments. Those companies _ including Citigroup Inc., Washington Mutual Inc. and Merrill Lynch _ were the big winners Wednesday.

"What has happened is the Fed is flooding the system with liquidity and eventually we should see some traction in the economy. And stocks tend to respond first," said Steve Goldman, chief market strategist at Weeden & Co.

Still, analysts were mindful that in recent months Wall Street has been known to soar one day and succumb the next, and that there are still many economic unknowns for the market to weather. And, given that stocks are so badly beaten down, bargain hunting played a part in Wednesday's turnaround.

Before Wednesday's session, the Dow had fallen nearly 10 percent since the start of the year, and it was down more than 15 percent since its record close of 14,164.53 on Oct. 9.

Broader stock indicators also surged Wednesday. The Standard & Poor's 500 index rose 28.10, or 2.14 percent, to 1,338.60, while the Nasdaq composite index rose 24.14, or 1.05 percent, to 2,316.41.

Advancing issues outpaced decliners by nearly 3 to 1 on the New York Stock Exchange. Consolidated volume came to a heavy 7.33 billion shares, up from 6.33 billion Tuesday.

Bond prices turned lower as stocks rebounded. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell in earlier trading but then recovered to 3.55 percent, up from 3.41 percent late Tuesday.

At its lowest point Tuesday, the Dow was 17.9 percent below its October closing high, meaning that the stock market has come perilously close to the 20 percent threshold that defines a bear market.

Investors may go into the market to be sure they don't miss out on a rally _ or the gains may be knocked down again.

Wall Street faces several months of uncertainty, with the bulk of fourth-quarter earnings reports still to come and economic reports likely to be disappointing. When it's more clear companies and consumers are spending freely, investors might relax.

However, with consumers burdened by debt and cutting back spending, it's impossible to predict when that relief will come.

The dollar was mixed against other major currencies Wednesday, while gold prices fell.

Battered small-cap companies _ which rely heavily on borrowing to grow their businesses _ got a lift Wednesday. The Russell 2000 index of smaller companies rose 21.86, or 3.26 percent, to 693.43.

Before the turnaround in U.S. stocks, European stocks closed sharply lower on economic worries and escalating uncertainty about the European Central Bank's willingness to lower rates. Britain's FTSE 100 closed down 2.28 percent, Germany's DAX index fell 4.88 percent, and France's CAC-40 fell 4.25 percent.

In earlier Asian trading, Japan's Nikkei stock average closed up 2.04 percent after falling 5.7 percent Tuesday. Similarly, Hong Kong's Hang Seng index surged 10.72 percent _ its biggest gain in 10 years _ after falling 13.7 percent in the previous two sessions.

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AP Business Writers Leslie Wines and Tim Paradis in New York contributed to this report.

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On the Net:

New York Stock Exchange: http://www.nyse.com

Nasdaq Stock Market: http://www.nasdaq.com

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