Investors scooped up financial, technology and other shares knocked down in a two-day selloff. Gains were broad-based, with 27 of 30 Dow components rising. Stocks slipped Monday and Tuesday, with bank shares leading the selloff, as investors backed off in anticipation of the Fed meeting. Investors were also retreating in the aftermath of a big rally. With the exception of a pullback in late June, the S&P 500 has basically been on the rise for five months. Since bottoming in early March, the index has gained 50% through the end of last week.

Federal Reserve meeting: The central bank concludes its two-day policy meeting Wednesday with an announcement expected at around 2:15 p.m. ET. The Fed is expected to hold rates steady at historic lows near zero percent. In the closely-watched statement, the bankers are likely to say that they see economic activity picking up, but remain cautious about the outlook. The Fed is not expected to say much about what its exit strategy may be after putting so much stimulus into the financial system.

Economy: The trade gap widened to $27 billion in June, the Commerce Department reported. The deficit stood at $26 billion in May, a 10-year low. The deficit was expected to widen to $28.7 billion in June, according to a consensus of economists surveyed by Briefing.com.

The Treasury budget is also on tap for Wednesday afternoon.

Company news: After the close Tuesday, Applied Materials (AMAT, Fortune 500) reported a fiscal third-quarter loss versus a profit a year ago on weaker revenue. However, the results were better than what analysts were expecting. The chipmaker also said it would at least break even in the fiscal fourth quarter and potentially post a profit of up to 4 cents per share. Analysts expect the company to post a loss of 5 cents per share. AMAT shares gained 4% Wednesday.

Bonds: Treasury prices inched higher, lowering the yield on the benchmark 10-year note to 3.65% from 3.67% late Tuesday. Treasury prices and yields move in opposite directions.

The government is auctioning $75 billion in debt this week as part of its efforts to reduce the deficit and fuel its recovery efforts. Treasury’s Tuesday auction of $37 billion in three-year notes saw stronger demand than other recent auctions. On Wednesday, the government auctions $23 billion in 10-year notes, with results expected around 1:00 p.m. ET. On Friday, it sells $15 billion in 30-year bonds.

Oil and gold: U.S. light crude oil for September delivery rose $1.40 to $70.85 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $2.70 to $950.30 an ounce.

Other markets: In global trading, European markets rallied in the afternoon. Asian markets tumbled.

To the extent that the market managed to avoid another iteration of the volatile meltdown that dragged market averages below key technical support levels, the initiative worked. The  S&P finished the session 2 points higher at 895. The Dow Jones Industrial Average which fell more than 200 points Monday in its worst setback in two months, finished the session off 11 points, or two-tenths of a percent, at 8328. 

Financial stocks once again provided a key leadership role in the session, with Bank of America ahead 3% and JPMorgan 2% higher. The gains came after the successful execution of a sale of two-year government Treasuries, and the start of the Federal Reserve policy meeting. It is a meeting that isn’t expected to result in any change in monetary policy, but which could show some changes in the markets, perhaps with some insight into the Fed’s quantitative easing policy. 

Meanwhile, commodity stocks – among the sharpest decliners in Monday’s meltdown – managed to stem their selloff, as energy prices ticked higher, suggesting some recovery in overall economic activity. Shares of Concoco Phillips added 2%. Of course, there proved to be enough cross currents in the market to prevent investors from getting too carried away with the appeal of stocks following Monday’s selloff. Shares of Boeing tumbled 6% Tuesday, after the aircraft manufacturer said it would delay the first flights of its 787 Dreamliner for a fifth time in two years in order to make some changes to its structure.

The New York Times also released  a report that some 19 banks undergoing government stress tests will pass. Citigroup shares alone rose by 10%.  Money managers who recently purchased stock in Wells Fargo and Citigroup are quite happy they did. Also a strong rally in retail stocks helped push the broader stock markets to gains on Wednesday, but with many chains reporting disappointing March sales have put pressure on that sector. Disappointing results from Wal Mart were a worrisome signal for the broader economy. With people already cutting back on spending because of the economy at higher end shops like Tiffany so are now the lower end spenders at places like Wal Mart. Regardless, there’s growing evidence that the economy is beginning to turn for the better. Inventories for one have fallen by the largest increment on record which is another bit of good news.

Looks like the tide is turning.

Early March saw bottoms in all the major indexes.  Since then the Dow has risen by almost 20%.  March may have been the bottom of this bear market some analysts are now saying. Bulls are seeing signs of a gradual turn in the U.S. economy with stocks and the banking system that were not evident in other bounces during this bear market in the last 17 or so months.  Recent reports indicate home sales have exceeded expectations and this past Friday a report indicated that consumer spending rose 0.2% from January.

Hundreds of billions of dollars of stimulus money is beginning to take effect.  Much of this will rely on the results of the stress tests for banks, which are expected to be completed in April. A passing grade for the banks would do much to restore confidence in the financial sector of the stock market. More talk of additional stimulus may create panic and negate much of the recent bounce. April will be a true test for the bulls recent bounce-back.