Stocks charged ahead on Wednesday as hopes for an interest cut by the Federal Reserve boosted financial services companies for a second day, while falling oil prices eased fears of higher energy costs.

The surge put Wall Street on track for its biggest two-day advance in 4 1/2 years.

Banks, insurers and other financials led the surge after Fed Vice Chairman Donald Kohn said renewed financial market turmoil could slow the economy more abruptly than previously thought. He said policy-makers must be flexible and pragmatic.

The Federal Reserve's Beige Book, which provides an anecdotal description of economic conditions, added to expectations for a rate cut.

The report said economic growth slowed in October and the first half of November as fallout from the housing slump took its toll.

The report indicates the economy is deteriorating, though not falling off a cliff, said Doug Roberts, chief investment strategist at Channel Capital Research in Shrewsbury, New Jersey.

This confirms what the Fed is seeing and what is making them nervous -- especially when you combine this with the consumer confidence numbers, which show the consumer is starting to feel some of the heat and what is happening with housing where there is really no end in sight.

The Dow Jones industrial average was up 322.64 points, or 2.49 percent, at 13,281.08. The Standard & Poor's 500 Index was up 37.75 points, or 2.64 percent, at 1,465.98. The Nasdaq Composite Index was up 77.28 points, or 2.99 percent, at 2,658.08.

(Additional reporting by Kristina Cooke; Editing by Kenneth Barry)

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