* Japan nuclear crisis will keep driving trading
* Investors seek bargains, S&P 500 back in black for year
* Dow up 1.4 pct, S&P up 1.3 pct, Nasdaq up 0.7 pct
* For up-to-the-minute market news see []
(Updates trading volume, options volume on SPX, VIX closing
price; Adds advancers-decliners in final paragraph)
By Angela Moon
NEW YORK, March 17 (Reuters) - Wall Street rebounded after
three days of declines on Thursday, but the advance could be
temporary as concerns about Japan's nuclear crisis persisted.
The S&P 500 <.SPX> recovered after giving up the year's
gains on Wednesday, but options activity showed traders are
increasing hedges against another decline in stocks.
"As the headlines come out of Japan, there are more nervous
traders liquidating their long positions in futures put on this
morning," said Steve Leuer, stock-index futures trader at X-FA
Trading firm in Chicago.
The recent losses brought out investors looking for
bargains. However, volume was lackluster, with just 7.95
billion shares changing hands on the New York Stock Exchange,
the American Stock Exchange and Nasdaq, below last year's daily
average of 8.47 billion and down sharply from Wednesday's
record for the year of 11.1 billion shares traded.
If the market is to refocus on fundamentals, more news from
bellwethers like FedEx Corp <FDX.N> will help. The world's
largest cargo airline forecast improved revenue on strong
demand, lifting shares 3.1 percent to $87.89.
The Dow Jones Transport average <.DJT> gained 1.4 percent.
At the close, a total of about 1.23 million option
contracts changed hands in the S&P 500 as puts outpaced calls
by a factor of 2.17:1, according to options analytics firm
Trade Alert. The recent average put-to-call ratio is 1.93.
An index put option conveys the right to sell an index at a
certain level.
The Dow Jones industrial average <> was up 161.21
points, or 1.39 percent, at 11,774.51. The Standard & Poor's
500 Index <.SPX> was up 16.81 points, or 1.34 percent, at
1,273.69. The Nasdaq Composite Index <> was up 19.23
points, or 0.73 percent, at 2,636.05.
But the S&P 500 is down 2.3 percent for the week so far.
Stocks' recent declines followed a rally of nearly six
months. The rally in itself has prompted predictions of a
market correction.
From a chart standpoint "I don't see anything right now
that suggests that the near-term decline is over," said Chris
Burba, short-term market technician at Standard & Poor's in New
York.
The CBOE Volatility Index VIX <.VIX>, Wall Street's fear
gauge, fell 10.3 percent to 26.37 as stocks rose, but the VIX
was still high compared with the recent average of about 20.
The market could see greater volatility on Friday as the
two-day quadruple witching period ends. Quadruple witching is
the expiration and settlement of March stock index futures,
single-stock futures, equity options and stock index options.
On Thursday, natural resource stocks helped lead the market
as commodity prices rebounded. Tensions in the Middle East and
North Africa drove oil prices up sharply. Brent crude for May
delivery <LCOc1> gained $4.40 to $115.00 a barrel.
Cliffs Natural Resources Inc <CLF.N> rose 5.8 percent to
$88.60 while Chevron Corp <CVX.N> gained 2.7 percent to
$102.24.
The S&P energy index <.GSPE> shot up 3.1 percent to be the
leading sector, even though the prospect of higher fuel costs
in general have hurt investor enthusiasm.
A correction at this point could be short-lived, some
analysis suggests.
Cleveland Rueckert, an analyst at Birinyi Associates Inc.
in Stamford, Connecticut, said in a note: "Since 1945, 5
percent declines that occur during a broader rally last an
average of 41 days and decline 8.29 percent.
"If the averages hold, the S&P 500 will bottom at 1,232" on
March 31, Rueckert wrote.
Advancing stocks outpaced declining stocks on the NYSE by a
ratio of about 3 to 1 while three stocks rose for every two
that fell on the Nasdaq.
(Reporting by Angela Moon; Additional reporting by Doris
Frankel; Editing by Kenneth Barry)
