By Kaitlyn Kiernan 
 

Stocks pushed higher as the market recovered some losses posted the previous session on worries about potential military action against Syria.

As investors await decisions from Western governments about how to respond to developments in Syria, they are looking ahead to a meeting by the Federal Reserve and a debate over the budget next month.

The Dow Jones Industrial Average pushed to the day's highs in late afternoon trading, adding 86 points, or 0.6%, to 14862. On Tuesday, the Dow slid 170 points to close at a two-month low.

The S&P 500 gained nine points, or 0.6%, to 1640, and the Nasdaq Composite Index rose 25 points, or 0.7%, to 3603.

On Tuesday, the S&P 500 suffered its biggest decline since June 20, amid worries over escalating tensions in Syria and concerns that Congress might fail to raise the limit on federal borrowing before the government runs out of money in mid-October.

The likelihood of a U.S. and allied military strike against President Bashar al-Assad's regime increased after U.S. officials said there was "little doubt" that forces loyal to Mr. Assad were responsible for the use of chemical weapons. On Wednesday, a senior administration official said Aleppo, Syria's largest city and an opposition stronghold, would likely be the next target of a chemical attack.

"Markets seem to have suddenly woken up to Syria, even though it has been an issue for a long time," said Frances Hudson, global thematic strategist at Standard Life Investments, an international asset manager with more than $277 billion under management.

But also, the bigger moves in U.S. markets Tuesday, and foreign markets Wednesday "could be the market still trading in holiday mode, with light volume adding to volatility," Ms. Hudson said.

In a quiet day for economic data, the National Association of Realtors said pending home sales for July fell slightly more than expected.

"With the Labor Day weekend coming up, very few earnings or economic releases, it's a slow recovery day," said John Carey, executive vice president and money manager with Pioneer Investments in Boston, which manages about $200 billion in assets.

Mr. Carey said he will keep an eye on oil prices and expressed concern about what effect a prolonged period of high prices might have on the economy and consumer spending.

Energy shares were leading stocks higher Wednesday, with the S&P 500 industry sector gaining 2%. That group is the one sector of 10 that is higher on the week.

Investors are focusing instead Wednesday on a number of events in September. At the end of next week, investors will look to the August jobs report as the latest gauge on the health of the economy. That will precede the next two-day meeting of the Fed that will begin Sept. 17. Some economists expect the Fed to announce a decrease in the U.S. central bank's stimulus measures.

"We'll be in a holding pattern for the remainder of the week," said Peter Jankovskis, co-chief investment officer at OakBrook Investments in Lisle, Ill., which oversees about $3.5 billion. Mr. Jankovskis last week rebalanced his portfolio, which is designed to always be fully invested in stocks, with an added focus on consumer stocks, particularly consumer staples, he said. He pared back exposure to the materials sector. Now, he is watching and waiting to see what happens.

"By next week, we should have a more definite plan for the government on Syria, and the focus will return to the Federal Reserve and the upcoming budget battle," he said.

The yield on the 10-year Treasury note rose to 2.782% but remained below the multiyear highs reached this month. Crude oil settled 1% higher, at $110.10 a barrel. Syria isn't a major oil producer, but traders worry that U.S. military action could lead to a wider conflict in the region.

Gold for August delivery lost 0.1%, to $1,419 a troy ounce. The dollar gained ground against both the yen and euro.

European markets were broadly lower as a result of Middle Eastern tensions. The Stoxx Europe 600 finished down 0.4%, closing at a six-week low. Germany's DAX index dropped 1%. Most Asian markets fell, with Japan's Nikkei Stock Average shedding 1.5% and Hong Kong's Hang Seng Index falling 1.6%.

In emerging markets, Dubai's DFM stock index declined 1.3% and the Philippine's PSE index dropped 3%. India's S&P BSE Sensex Index edged up 0.2%, but the country's currency slumped to a record low against the dollar for a second consecutive day. The rupee has lost more than 20% against the dollar since May over concerns that the country could find it hard to close its current-account deficit.

"What you see happening now is panic," said Michael Yoshikami, chief executive of Destination Wealth Management, which manages $1.3 billion. "You see it with currencies in India and Thailand," he said. "Given the uncertainty around the world, not only in Syria but also places like Egypt, there's this flight to safety and people are moving to blue-chip countries."

In corporate news, TiVo Inc. (TIVO) rallied after the maker of television set-top boxes swung to a fiscal second-quarter profit, boosted by a large litigation settlement. The company provided an upbeat outlook for the current quarter.

Express Inc. (EXPR) gained as the youth-focused retailer's same-store sales jumped and the company raised its full-year earnings outlook.

Jewelry retailer Zale Corp. (ZLC) jumped to a more than four-year high after the company reported a narrower fiscal fourth-quarter loss with strong same-store sales and widening margins.

-Chris Dieterich contributed to this article.

Write to Kaitlyn Kiernan at kaitlyn.kiernan@wsj.com

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