Stocks opened sharply higher this morning as credit markets calmed down a bit and speculation grew on Wall Street that a federal funds rate cut was coming, CNNMoney.com reported.

The Dow Jones industrial average jumped about 100 points in the first 20 minutes of trading, a gain of about 0.8 percent. The broader S&P 500 index and the Nasdaq composite index each rallied about 1 percent.

The Wall Street Journal reported that many believe the Federal Reserve will have to cut interest rates sharply, perhaps in the next week or two, to help calm jittery financial markets. But Fed officials would prefer to wait until their Sept. 18 meeting.

A meeting yesterday between Federal Reserve Chairman Ben Bernanke, Senate Banking Committee Chairman Christopher Dodd and Treasury Secretary Hank Paulson fueled the expectations for a Fed rate cut.

Meanwhile, Treasury prices fell in another sign that investors are less nervous than earlier in the week. The 10-year note slipped nearly half a point, raising its yield to 4.65 percent from 4.59 percent late Tuesday. Yields on three-month bills also rose. Bond prices and yields move in opposite directions.