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Traders decide to shrug off Tuesday’s negative sentiment and downturn with a fresh rally to get the bulls going.

Whereas Tuesday was an overall slaughter in U.S. equity markets, Wednesday saw concentrated selling in specific names, including one particular broker-dealer exposed to sovereign debt, as well as Amazon.com after an important earnings miss.

U.S. financials rallied hard in mid-to-late day trading with large banks posting large percentage point gains. SSGA’s Financial Select SPDR ETF XLF closed up 1.7 percent at 13.25.

Meanwhile, the S&P 500 rallied to 1242, up one percent whilst the Dow shot up to 11,869, up 1.4 percent.

But trouble remains as traders eye the 1250 level on the S&P and 12,000 level Dow Jones Industrial Average. Europe remains at an impasse on what to do about Greece’s debt and in what capacity the EFSF will function in terms of doling out assistance to EU nations.

More information is expected to come by Friday morning with a clearer picture of how banks and investors will handle Europe’s debt crisis. Greek bondholders could see a haircut of up to 50 percent that has been widely reported.

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