By Rodrigo Campos

"The market does not like political instability, and Geithner's hearing has thrown a monkey wrench to a smooth transition," said Jessica Hoversen, fixed-income market analyst at MF Global Research in Chicago.

"His post is one of the more important roles in the new administration."

Geithner is seen as Obama's point man in battling the economic crisis. And as the president of the Federal Reserve Bank of New York since 2003, Geithner is expected to hit the ground running if confirmed as Treasury secretary.

"Geithner said (President Barack) Obama's economic plan will come in the next few weeks and people are hoping for an immediate package," said Bret Barker, portfolio manager at Metropolitan West Asset Management in Los Angeles.

"The fear is that it could take two to three months."

The Dow Jones industrial average <.DJI> added 54.32 points, or 0.68 percent, to 8,003.41, after earlier rising as high as 8,109.02. The Standard & Poor's 500 Index <.SPX> gained 6.81 points, or 0.85 percent, to 812.03, off its session high at 823.70. The Nasdaq Composite Index <.IXIC> rose 15.17 points, or 1.05 percent, to 1,456.03, after earlier rising as high as 1,475.26.

Earlier in the session, the S&P 500 rose more than 2 percent, with the rebound in financials leading the way.

International Business Machines Corp contributed the biggest boost to the Dow, jumping nearly 10 percent to $89.82 after the world's top technology services company posted a quarterly profit and a 2009 profit outlook that surpassed Wall Street's expectations. That burst of strength from IBM reassured investors that the Dow component can weather the global economic downturn.

The financial sector drove the S&P 500's gains following Tuesday's sharp sell-off, which was ignited by fears of further losses in banks.

The broad KBW index of bank stocks <.BKX> gained 4.5 percent, while the S&P financials index <.GSPF> advanced 4.4 percent.

"People are excited because financials are valued so low at this point. It's the mentality that they can't get any lower, but they've proven time and time again that they can," said Jocelynn Drake, market analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

JPMorgan Chase ranked as the Dow's second-biggest advancer, rising 11.2 percent to $20.12.

On the downside, Wal-Mart Stores Inc exerted the heaviest drag on the Dow. Shares of Wal-Mart, the world's largest retailer and leading discount chain, slid 3.6 percent to $48.75.

A day after his historic inauguration, President Barack Obama was scheduled to meet this afternoon with his economic advisers, who are working with the Democratic-led Congress on an $825 billion fiscal stimulus package.

(Additional reporting by Richard Leong, Jennifer Ablan and Leah Schnurr; Editing by Jan Paschal.)