NEW YORK (CNNMoney.com) -- Stocks opened lower Wednesday morning as the Federal Reserve resumed its policy meeting and IBM is reportedly in talks to buy Sun Microsystems for at least $6.5 billion.

Also in focus: a congressional hearing on bailed-out insurer American International Group and a larger-than-expected rise in consumer prices.

The Dow Jones industrial average (INDU) was down 70 points, or 0.9%, shortly after the opening bell. The S&P 500 (SPX) index slid 0.8% while the Nasdaq composite (COMP) lost 0.7%.

On Tuesday, stocks rallied after the government issued a much stronger-than-expected report on housing starts and building permits in February. It was the fifth gain in six sessions for the major indexes.

But the market could have trouble extending Tuesday's gains, according to Ken Wattret, economist with BNP Paribas in London.

"The sense we've had is that maybe the scale of the rally has gone a bit farther than the fundamentals suggest," said Wattret. "So we're a little worried that the rally has run out of stream."

Economy: The Federal Reserve wraps up its two-day policy meeting, with a statement expected around 2:15 p.m. ET. The central bank is expected to hold the fed funds rate, its key short-term interest rate, at zero.

But the bank might declare that it will start buying long-term U.S. Treasurys, having said at its last few meetings that it was prepared to do so.

Before the open, the government announced an increase in consumer prices for February that was slightly higher than expected.

The Bureau of Labor Statistics said the Consumer Price Index rose a seasonally adjusted 0.4% in February. The core CPI, excluding volatile food and energy prices, rose 0.2%.

A consensus of economists surveyed by Briefing.com had forecast an overall increase of 0.3%, with core CPI up 0.1%. In January, CPI was up 0.3% and the core prices were 0.1% higher.

IBM-Sun: IBM (IBM, Fortune 500) is in talks to buy Sun Microsystems (JAVA, Fortune 500) for at least $6.5 billion, The Wall Street Journal reported. The deal could bolster IBM's computer server products against rivals such as Hewlett-Packard (HPQ, Fortune 500).

AIG: A House Financial Services subcommittee hears Wednesday about the $170 billion government bailout of AIG (AIG, Fortune 500). Among the witnesses will be CEO Edward Liddy, who will face scrutiny on the controversial $165 million paid in bonuses to some of the employees whose actions led to the bailout. (full story)

Global markets: Asian markets closed higher Wednesday, with Tokyo's Nikkei index up 0.3%. European stocks slumped in midday trading.

Oil prices fell 50 cents to $48.66 a barrel ahead of the government's weekly inventory report, after reaching a three-month high on Tuesday.

The dollar slipped versus the euro and the yen, but rose against the British pound.  

NEW YORK (CNNMoney.com) -- Stocks were expected to open mostly lower Wednesday as investors brace for the Federal Reserve's interest rate decision and a congressional hearing on bailed-out insurer American International Group, and consider a possible IBM acquisition of Sun Microsystems.

At 7:28 a.m. ET, the Dow Jones industrial average and S&P 500 futures were lower, while Nasdaq futures were higher after a report on the possible IBM-Sun deal. Futures measure current index values against the perceived future performance. They can be used to forecast activity after the opening, though they're not always accurate.

On Tuesday, stocks rallied after the government issued a much stronger-than-expected report on housing starts and building permits in February. It was the fifth gain in six sessions for the major indexes.

But Ken Wattret, economist with BNP Paribas in London, is skeptical that the markets have what it takes to keep the rally going.

"The sense we've had is that maybe the scale of the rally has gone a bit farther than the fundamentals suggest," said Wattret. "So we're a little worried that the rally has run out of stream."

Economy: The Federal Reserve wraps up its two-day policy meeting, with a statement expected around 2:15 p.m. ET. The central bank is expected to hold the fed funds rate, its key short-term interest rate, at zero. But the bank might declare that it will start buying long-term U.S. Treasurys, having said at its last few meetings that it was prepared to do so.

Before the open, the government reports on consumer prices for February. A consensus of economists surveyed by Briefing.com forecasts an overall increase of 0.3%, with prices excluding food and energy up 0.1%. In January, CPI was up 0.3% and the core prices were 0.1% higher.

AIG: A House Financial Services subcommittee hears Wednesday about the $170 billion government bailout of AIG (AIG, Fortune 500). Among the witnesses will be CEO Edward Liddy, who will face scrutiny on the controversial $165 million paid in bonuses to some of the employees whose actions led to the bailout. (full story)

IBM-Sun: IBM (IBM, Fortune 500) is in talks to buy Sun Microsystems (JAVA, Fortune 500) for at least $6.5 billion, The Wall Street Journal reported. The deal could bolster IBM's computer server products against rivals such as Hewlett-Packard (HPQ, Fortune 500).

Global markets: Asian markets closed higher Wednesday, with Tokyo's Nikkei index up 0.3%. European stocks were mixed in morning trading.

Oil prices fell 88 cents to $48.28 a barrel ahead of the government's weekly inventory report, after reaching a three-month high on Tuesday. The dollar slipped versus the euro and the yen, but rose against the British pound.  

NEW YORK (CNNMoney.com) -- Stocks surged Tuesday, with the major stock gauges ending higher for the fifth out of six sessions, as investors continued to dig out from 12-year lows.

The Dow Jones industrial average (INDU) added 179 points, or 2.5%. The S&P 500 (SPX) index rose 24 points, or 3.2%. The Nasdaq composite (COMP) gained 24 points, or 3.2%.

A better-than-expected housing market report released Tuesday gave investors a reason to cheer. But the advance over the past week has been largely a rebound after all the selling, said John Merrill, chief investment officer at Tanglewood Wealth Management.

"The decline markets endured between the middle of January and the middle of March was like a rubber band pulled tighter and tighter with each new low," he said. "It was at such an extreme that it had to snap back at some point."

Between Jan. 6 and March 9, the S&P 500 slumped nearly 28%, ending at a 12-1/2 year low. Merrill said that level was "an important low, but probably not the final low." Nonetheless, he said stocks could ultimately rise 20% or more off those lows before hitting a wall.

Since March 9, stocks have gained in five of six sessions, with the S&P 500 rising 15% as of Tuesday's close.

In addition to the technical factors causing the advance, the rally was in reaction to a few pieces of better news, including Tuesday's housing report and last week's February retail sales report.

Citigroup and other banks said they were profitable in the first two months of the year, helping the financial sector. Banks also got a boost from talk about reinstating the "uptick rule" that limits short selling and changing mark-to-market accounting.

"It's not surprising that after selling off aggressively, the market is now looking for some signs of stability," said Alan Gayle, director of asset allocation at RidgeWorth Investments.

However, he said investors need to be cautious, as a few better-than-expected economic reports doesn't change the overall picture, which remains tough.

"This is very much a bear market rally and I think most people agree that at some point, we are going to need to retest those lows," said Drew Kanaly, chairman and CEO of Kanaly Trust Company.

"At some point we are going to have to start looking at the earnings and that's probably the next turning point," he said.

First-quarter earnings reports - which will start trickling out next month - are expected to be weak across the board. He said that the earnings will probably cause the markets to retest those recent lows. However, that should give Wall Street a better sense of where the market is likely to find a floor, paving the way for a bigger stock advance.

Company news: Financial stocks gained, including Citigroup (C, Fortune 500), JPMorgan Chase (JPM, Fortune 500), Goldman Sachs (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500). The KBW Bank (BKX) sector index added 6%.

Tech shares gained as well, lifting the Nasdaq. Cisco Systems (CSCO, Fortune 500) rose on an upbeat Goldman Sachs note, Reuters reported, with the brokerage adding it to its Conviction Buy list.

Dell (DELL, Fortune 500) announced a new line of laptops and Apple (AAPL, Fortune 500) introduced a new version of software for its iPhone.

Intel (INTC, Fortune 500), Microsoft (MSFT, Fortune 500), Google (GOOG, Fortune 500) and Yahoo! (YHOO, Fortune 500) were among the other big tech gainers.

Alcoa (AA, Fortune 500) shares slumped 8.7% after the company announced late Monday that it will cut its dividend, issue stock and convertible notes worth about $1.1 billion and cut its spending in 2010.

Caterpillar (CAT, Fortune 500) said it is laying off over 2,400 more employees at five plants in Illinois, Indiana and Georgia so as to save costs amid the economic slowdown. Shares of the Dow component ended 1.5% higher.

AIG (AIG, Fortune 500) remained in focus amid growing fury that the company paid millions in bonuses to executives, even as the company received $170 billion in federal bailout money. President Obama has said he will try to block the bonuses. AIG's CEO Edward Liddy will go before a House panel Wednesday that is probing the government's involvement in the troubled insurer.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by almost four to one on volume of 1.49 billion shares. On the Nasdaq, advancers beat decliners by over three to one on volume of 2.13 billion shares.

Economy: Construction of U.S. homes jumped in February, surprising economists who were expecting a decline.

Housing starts rose to a seasonally adjusted annual rate of 583,000 in the month, up 22% from a revised 477,000 in January. Housing starts haven't risen month-over-month since last June. Economists surveyed by Briefing.com expected starts to have fallen to a 453,000 annual unit rate.

Building permits, a measure of builder confidence, rose 3% to a seasonally adjusted rate of 547,000 versus forecasts for a drop to 500,000.

Another government report, the Producer Price Index (PPI), showed a smaller-than-expected rise. PPI, a measure of wholesale inflation, rose 0.1% in February after rising 0.8% in January. Economists thought it would rise 0.4%.

The so-called core PPI, which strips out volatile food and energy prices, rose 0.2% after climbing 0.4% in the previous month. Economists thought it would increase 0.1%.

In other news, the Federal Reserve holds its latest policy meeting Tuesday and Wednesday. The central bank is expected to hold the fed funds rate, its key short-term interest rate, essentially at zero. But the bank could declare it will start buying long-term U.S. Treasurys after saying it was prepared to do so at its last few meetings.

New legislation was introduced Monday night to reinstate the "uptick rule," adding to pressure on the Securities and Exchange Commission. The SEC meets April 8 to discuss restoring the rule. Critics have claimed that the rule's absence has exacerbated stock selling in the financial sector.

Bonds: Treasury prices tumbled, raising the yield on the benchmark 10-year note to 3.01% from 2.95% Monday. Treasury prices and yields move in opposite directions.

Lending rates were improved. The 3-month Libor rate fell to 1.3% from 1.31% Monday, while the overnight Libor rate dipped to 0.31% from 0.33%, according to Bloomberg.com. Libor is a bank-to-bank lending rate.

Other markets: In global trading, Asian markets ended mixed and European markets declined.

In currency trading, the dollar fell versus the euro and gained against the yen.

U.S. light crude oil for April delivery rose $1.81 to settle at $49.16 a barrel on Monday.

COMEX gold for April delivery fell $5.20 to settle at $916.80 an ounce. 

At 8:15 a.m. ET, the Dow Jones industrial average and the S&P futures were down modestly, while the Nasdaq futures made slight gains.

Futures measure current index values against the perceived future performance. Futures can be used as a forecast for trading activity after the bell, though they're not always accurate.

On Monday, stocks couldn't sustain earlier gains, snapping a four-session winning streak. The Dow lost 7 points, the S&P was down 0.4% and the Nasdaq fell nearly 2% as tech stocks faltered.

"The market is trying to hold on to the gains, so it needs to trade within narrow levels, unless we have some earth shattering news, one way or another," said Peter Cardillo, chief market economist for Avalon Partners.

Global markets on Tuesday were mixed. In Asia, Tokyo's Nikkei index surged 3.2%. The European markets were lower in midday trading.

Economy: The government issues key reports on housing and inflation before the markets open.

Housing starts are expected to have fallen in February to a 450,000 annual rate in February from 466,000 the previous month, according to a consensus of economists surveyed by Briefing.com. Building permits are expected to have dropped to a 500,000 annual rate from 531,000 in January.

The Producer Price Index (PPI), a measure of wholesale inflation, is forecast to have risen 0.4% in February, according to the Briefing.com consensus, after rising 0.8% in the previous month. The so-called core PPI, which strips volatile food and energy prices, is expected to be up 0.1% after climbing 0.4% in the previous month.

The Fed's policy-making body begins a two-day meeting. It's expected to hold interest rates steady near zero percent, and determine the best ways to help kick the economy out of the recession.

Companies: The aluminum company Alcoa (AA, Fortune 500) said it slashed its dividend by 82% on Monday, in an effort to reduce costs by $2.4 billion annually. This includes the ongoing plan to cut 13,500 jobs by the end of the year. Alcoa shares were down 12% in premarket trading.

Retailer Target (TGT, Fortune 500) is facing a proxy fight, as shareholder William Ackerman is pushing to nominate five board seats. Target shares rose 2% in premarket trading.

Oil and money: Oil prices edged down 3 cents a barrel to $47.32. The dollar rose versus the euro, the British pound and the yen. 

At 4:41 a.m. ET, the Dow Jones industrial average and the S&P futures were lower, while Nasdaq futures were higher.

Futures measure current index values against the perceived future performance. Futures can be used as a forecast for trading activity after the bell, though they're not always accurate.

On Monday, stocks couldn't sustain earlier gains, snapping a four-session winning streak. The Dow lost 7 points, the S&P was down 0.4% and the Nasdaq fell nearly 2% as tech stocks faltered.

Global markets on Tuesday were mostly higher. In Asia, Tokyo's Nikkei index surged 3.2%. The European markets were lower in early trading.

Economy: The government issues key reports on housing and inflation before the markets open.

Housing starts are expected to have fallen in February to a 450,000 annual rate in February from 466,000 the previous month, according to a consensus of economists surveyed by Briefing.com. Building permits are expected to have dropped to a 500,000 annual rate from 531,000 in January.

The Producer Price Index (PPI), a measure of wholesale inflation, is forecast to have risen 0.4% in February, according to the Briefing.com consensus, after rising 0.8% in the previous month. The so-called core PPI, which strips volatile food and energy prices, is expected to be up 0.1% after climbing 0.4% in the previous month.

Oil and money: Oil prices eased 60 cents a barrel to $46.75. The dollar slipped versus the euro and gained against the yen.