New York - US stocks gained Wednesday, ending a volatile session and a two-day losing streak, amid optimism over a major merger in the housing sector.

Stocks briefly cut gains after the Federal Reserve said in its minutes from its last policy meeting in March that "downward risks" remained in the economy. The United States is in the midst of one of its longest recessions since the Great Depression.

The Fed noted a rapid deterioration in labour market conditions, with steep job losses across all sectors.

The US shed 663,000 jobs in March, lifting the unemployment rate to 8.5 per cent, its highest level in more than a quarter century. More than 5 million jobs have now been lost since a recession began in December 2007, the sharpest drop since World War II.

The markets rallied after news that Pulte Homes Inc was buying Centex Corp in a 3.1-billion-dollar deal to create the country's largest home builder.

Despite sliding Monday and Tuesday, stocks have gained nearly 20 per cent since reaching 12-year lows in early March, as investors took some better-than-expected industry figures as a sign that the US economy may have hit bottom.

"We think that a bottom is being put in place," David Heupel of Thrivent Financial for Lutherans in Minneapolis told Bloomberg news. "The more comfort you get with earnings and the viability of financial companies, the more enthusiasm goes back into stocks and into the market."

The blue-chip Dow Jones Industrial Average was up 47.55 points, or 0.61 per cent, to 7,837.11. The broader Standard & Poor's 500 Index gained 9.61 points, or 1.18 per cent, to 825.16. The technology-heavy Nasdaq Composite Index climbed 29.05 points, or 1.86 per cent, to 1,590.66.

The US currency dropped against the euro to 75.34 euro cents from 75.37 euro cents on Tuesday. The dollar dropped against the Japanese currency to 99.76 yen from
100.47 yen. (dpa)