The Dow Jones industrial average (INDU) rose 33 points, or 0.3%, and the S&P 500 (SPX) added 3 points, or 0.2%. The Nasdaq composite (COMP) finished lower, losing 12 points, or 0.5%
After the closing bell Tuesday, Standard and Poor's cut the ratings on dozens of major banks, including Bank of America, Goldman Sachs, and Citigroup. The downgrades were the result the agency's new ratings criteria for the world's 37 largest financial institutions.
Nerves were strained after Moody's warned that 87 banks across 15 of the 17 eurozone countries could face downgrades and Italy auctioned €7.5 billion of 3- and 10-year bonds that drew the highest yields in years. Borrowing costs in Italy have been above the uncomfortable 7% mark for days.
But investors are banking on European leaders to step up and agree to a detailed resolution to Europe's debt crisis.
European leaders are working on a new plan to ensure fiscal discipline across the euro area. The proposal is expected to give the European Union greater authority over the budget policies of individual eurozone nations.
"The story continues to be Europe, and signs of anything positive coming out of there in a deeply oversold market are enough to trigger a rally," said Fred Dickson, chief market strategist at D.A. Davidson & Co.
But Dickson remains unconvinced that the enthusiasm will last.
"We've had short-term rallies based on frequent bursts of positive news, but those are quickly dampened by reality when nothing comes of these European meetings," he said. "I'm not negative, but I'm skeptical. I'll view these rallies as short-term events until we see signs of a more definitive agreement reached by the eurozone and the European Central Bank."
The dollar slumped against the euro, the British pound and the Japanese yen.
Oil for January delivery rose $1.58 to settle $99.79 a barrel.
Gold futures for December deliver rose $2.60 to settle at $1,713.40 an ounce.
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