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One minute, investors are running scared from the stock market out of a deep-seated fear about the subprime mortgage mess in the United States, a credit crunch that has derailed bond offerings, stubborn inflation and rising interest rates worldwide. The next minute, they have thrown those fears aside and are snapping up everything with a ticker symbol. Are investors a tad excitable these days?

"It seems to me that there is a battle going on on both sides of the market," said John Johnston, chief strategist at The Harbour Group at RBC Dominion Securities. "You can find a good number of people to say that we are heading over a cliff and a lot of people who say that it's all good times.

The good-time crowd certainly won out on Wednesday, even if the intra-day volatility was strong. The S&P composite index jumped nearly 1.5%, closing at 13,758.19, up 197.62 points. At one point, it was up more than 2%. In percentage terms, this was one of the biggest one-day rallies this year and every major sector was on fire.

The S&P 500 rose 1.4%, and the Dow Jones Industrial Average leaped up about 150 points, or more than 1.1%, in the final hour of trading. In Europe, major indexes rose between 1.2% and 2.5%. And in Asia, benchmark indexes in India, Hong Kong, Taiwan and Korea charged higher.

Now, investors are trying to figure out whether this rally has legs, or if it is merely a temporary bounce triggered by cash-laden bargain hunters.

There was certainly a whack of good news for optimistic investors to embrace. The U.S. Federal Reserve appears to think that the U.S. economy - and, more specifically, the housing market - is resilient enough to withstand interest rates at their current level. The embattled stocks of homebuilders took off.

For what it is worth, George W. Bush, the U.S. President, also sounded optimistic during an interview with journalists on Wednesday.

"I'm not an economist, but my hope is that the market, if it functions normally, will be able to yield a soft landing," Mr. Bush said. "That's kind of what it looks like so far."

More specifically, corporate earnings during the busy second quarter reporting season have been strong, and the corporate bond market is showing signs of life after a difficult period in which investors have been balking at debt offerings.

According to Thomson Financial, high-yield or "junk bond" offerings shriveled to just US$2.4-billion in July, down from US$30.4-billion in June as dozens of bond issues were pulled from the market when investors demanded a higher yield for the risks they were assuming. Investment grade bonds suffered a similar fate.

But this week has showed that the market is by no means dead.

According to Bloomberg, 13 companies launched bonds into the market on Wednesday alone - including offerings from Kraft Foods Inc. (KFT) and Citigroup Inc. (NYSE:C) - making it the busiest day in two months. This follows a US$2.25-billion offering from Bear Stearns & Co. (NYSE:BSC) on Tuesday.

Sal Guatieri, senior economist at BMO Capital Markets, pointed out that U.S. commercial banks have been lending more and more money to businesses and homeowners, even as the supposed credit crunch has been going on. "Sounds like the vast majority of companies and households are worthy enough to keep borrowing, likely because they are flush with profits and income," Mr. Guatieri said in a note to clients.

Still, even though Wednesday gave investors something to buy on, the recent moves of the stock market show that it does not take much to send sentiment hurtling in the other direction.

It is not too early to buy stocks on the dips, but as for the all-clear signal on volatility, investors will have to wait.

Source: Market Volatility: Investors Still Waiting for the All-Clear Signal