NEW YORK, Jan. 13 (Xinhua) -- U.S. stocks rebounded on Wednesday after previous session's decline, as financials pared early losses and Fed said the economy was improving modestly.

    While top executives of Goldman Sachs, JPMorgan Chase, Morgan Stanley and Bank of America testified before the Financial Crisis Inquiry Commission on Wednesday, investors were expecting the banks to have a strong earnings season which starts with JPMorgan this Friday. All four banks traded higher on Wednesday.

    Technology shares also led the market higher. The Nasdaq Composite Index climbed more than 1 percent after Intel gained 1.9percent ahead of its earning report due after Thursday's close.

    The health-care sector was boosted after Credit Suisse upgraded bellwether Merck to outperform from neutral.

    Energy stocks' performance on Wednesday was weak as crude oil prices dropped for a third day below 80 U.S. dollars a barrel in New York trading.

    In economic news, the Federal Reserve said the U.S. economy remained weak at the beginning of 2010, but is improving modestly and spreading to more parts of the country.

    The Treasury Department said the federal budget deficit reached a record in December and that the deficit is growing faster for the first three months of the budget year than in last year's record.

    The Dow Jones rose 53.51, or 0.5 percent, to 10,680.77. Broader indexes also went higher. The Standard & Poor's 500 index added gained 9.46, or 0.83 percent, to 1,145.68 and the Nasdaq rallied 25.59, or 1.12 percent, to 2,307.90.