The Dow Jones industrial average jumped 346.80 points, or 4.57%, to 7,938.79. The tech-heavy Nasdaq composite index gained 41.66 points, or 3.55%, to 1,213.72. The broader Standard & Poor's 500-stock index shot up 32.63 points, or 4%, to 847.91.
The rebound comes after the major averages fell to fresh multi-year lows in September. For the third quarter ended Monday, the Dow lost 17.9%, the S&P 500 fell 17.7%, and the Nasdaq declined 19.9%.
On Wednesday, no economic reports are scheduled. But investors will likely keep an eye on Dell Computer (DELL
), which held an analyst conference Tuesday. After the market close, the PC maker reportedly raised its third-quarter revenue forecast to $9.1 billion from $8.9 billion. It also said earnings per share would be 21 cents, the high end of its previous outlook, thanks to growth in shipments of servers and storage systems.
Investors largely ignored Tuesday's latest economic news. The ISM-manufacturing index, a survey of national manufacturing activity, fell to 49.5 in September from 50.5 in August. The report was weaker than expected, and the first reading below 50, which signals contraction, since January.
Construction spending for August fell 0.4% to a seasonally-adjusted annual rate of $829.8 billion, after a revised 0.1% decline in July. That was the lowest level since November, 2000.
Auto makers gained after releasing September sales today. General Motors' (GM
) vehicle sales slid 13% in September, while Ford's (F
) sales fell 5% as zero-percent financing deals caused automakers to have low inventories. But sales at DaimlerChrysler's (DCX
) Chrysler Group surged 18%.
Among stocks on the move, Fannie Mae (FNM
) shot higher after the mortgage company says its duration gap narrowed in September, to negative 10 months from a record negative 14 months in August. The duration gap measures the company's success in matching its assets and liabilities, and had been widening due to low interest rates and heavy refinancing activity.
Drugmaker Forest Labs (FRX
) was also higher on a strong September-quarter forecast.
News that the chief U.N. weapons inspector said that a new tentative agreement has been reached with Iraq for the return of his team to check for the presence of illegal, nuclear, chemical or biological weapons may have also helped boost stocks.
The legs were knocked out from under the Treasury market Tuesday, chopping a point off the bond. Fannie Mae's duration rebalancing, Wall Street's gains, Fed views, and reported Iraq compliance overshadowed a drop in ISM and weak car sales, says economic research outfit MMS International.
News that Fannie Mae's duration gap shrank in September has weighed on the mortgage-sensitive 5-year and 10-year notes, according to MMS. Speculation that Fannie might have to purchase over $100 billion in Treasuries to add duration prompted huge buying in 5-year and 10-year notes last week.World Markets
European markets were rebounding from Monday's sharp losses. In London, the Financial Times-Stock Exchange 100 index was up 75.60 points, or 2.03%, to 3,797.40, led by Barclays and HBOS after a strong house prices report. BP and Shell Transport & Trading were both strong.
In France, the CAC 40 gained 51.11 points, or 1.84%, to 2,828.56. And in Germany, the DAX Index added 96.20 points, or 3.47%, to 2,865.23.
In Japan, the market finished lower. The Nikkei fell 221.03 points, or 2.36%, to close at 9162.26, led by bank shares. Stocks deepened losses in Tokyo Tuesday, hurt by worsening sentiment towards the bellwether U.S. economy and corporate earnings. Uncertainty about Japan's financial sector also weighed down the market, though market players were betting that the government would take more decisive actions to help stabilize the banking system.
In Hong Kong, the market was closed for National Day.