The Dow rose 48.82, or 0.45 percent to 10,973.56. The Dow plunged 120.54 Tuesday.
Broader stock indicators also closed higher. The Standard & Poor's 500 index was up 6.80, or 0.55 percent, at 1,246.00, and the Nasdaq composite index rose 11.59, or 0.55 percent, to 2,111.84.
Traders were still nervous after the Dow Jones industrial average lost more than 120 points Tuesday on a selloff fueled by worries about the Fed's pending interest rate decision and its accompanying policy statement. The Fed is expected to announce at least a quarter-point rate hike, which would bring short-term interest rates to 5.25 percent, but a few economists expect a bolder half-point increase. Any increase would be the 17th consecutive rate hike since the Fed began to tighten credit in 2004.
There was little corporate or economic news to guide traders. J. Crew's (JCG) initial public offering at a higher-than-expected price and its subsequent run-up provided a scrap of cheer. The preppy retailer's offering was the third largest retail IPO of all time.
Stocks have barely budged for the year despite an early run-up and, more recently, a nearly two-month slide.
"If you're a long-term investor, I don't think there's been anything interesting to talk about in 2006; if you're a short-term trader, it's been painful," said Stephen Wood, portfolio strategist at Russell Investment Group.
Advancing issues led decliners by roughly 9 to 7 on the New York Stock Exchange. Volume has been declining over the last week and a half as traders waited for the Fed's next move. Volume on the New York Stock Exchange was 1.49 billion, below Tuesday's volume of 1.57 billion.
Stocks are still struggling following a selloff in May and early June. The tendency has been for strong opens to be followed by late-day selloffs, or weak opens to build into buying sprees.
"Effectively, it's the first hour of the last hour that matters," said Jack Caffrey, equities strategist at J.P. Morgan Private Bank. "That's been very inconsistent."
Bonds fell, with the yield on the 10-year Treasury note rising to 5.25 percent, up from 5.22 percent Tuesday. The U.S. dollar was mixed against other major currencies. Gold prices fell.
Crude oil futures rose. A barrel of light crude settled at $72.19, up 27 cents, trading on the New York Mercantile Exchange.
Energy was the strongest sector of the day, as shares of Exxon Mobil Corp. (XOM), Chevron Corp. (CVX) and ConocoPhillips (COP) advanced after U.S. Energy Secretary Samuel Bodman said he had authorized crude oil loans from the nation's Strategic Petroleum Reserve to two Louisiana refineries that had been forced to curtail production because of a waterway blockage.
In the broader market, traders have sharpened their focus on Fed policy following its May 10 rate hike; stocks have gone on a roller coaster ride with every utterance of Fed Chairman Ben Bernanke or a Fed governor.
At this point, investors are expecting a quarter point rate hike Thursday. But if they get it, they'll be on tenterhooks until the Fed's August meeting, said Matthew Smith, vice president and portfolio manager at Smith Affiliated Capital in New York, a boutique fixed-income firm.
In company news, shares of J. Crew Group Inc. were priced late Tuesday at $20 per share, above the expected range of $15 to $17 a share; they closed at $25.55. J. Crew's debut marks the third largest apparel retail IPO ever, according to Richard Peterson, a research analyst at Thomson Financial. The top two were Intimate Brands in 1995 and Saks Holdings Inc. in 1996.
As energy stocks advanced Exxon Mobil rose $1.47 to $61.12; Chevron rose $1.26 to $61.36 and ConocoPhillips rose $1.39 to $64.14.
ConAgra Foods Inc. fell 8 cents to $21.75 after its reported fourth-quarter profits that would have missed estimates if not for a one-time gain.
Bausch & Lomb Inc. (BOL) rose $2.40 to $49.81 after an American Medical Association study found most patients suffering from a fungal eye infection thought to be caused by the company's ReNu with MoistureLoc contact lens solution practiced poor contact lens hygiene, such as sleeping with lenses on or wearing expired lenses.
Spice and seasonings maker McCormick & Co. rose 88 cents to $33.55 after it said second-quarter profit rose 44 percent, lifted by a large gain from an asset swap involving a joint venture. Reflecting the gain from the joint venture swap, McCormick also raised its full-year estimate
The Russell 2000 index of smaller companies was up 1.10, or 0.16 percent, at 688.04.
Overseas, Japan's Nikkei stock average fell 1.88 percent. Britain's FTSE 100 gained 0.47 percent, Germany's DAX Index lost 0.04 percent, and France's CAC-40 rose 0.06 percent.