Stocks bounce back after early selloff

NEW YORK -- Investors returned cautiously to the stock market Tuesday, wary about the downtrodden economy while trying to recoup some of the ground in the previous session's enormous decline. The major indexes fluctuated in late afternoon trading after giving up a big early advance.

The advance was initially fueled by some reassuring words from Ford Motor Co. Chief Executive Alan Mulally, who said the automaker has enough cash to make it through 2009 and might not need government help. Meanwhile, the market was encouraged after General Electric Co. said it expects to pay a dividend despite projections that fourth-quarter results will near the low end of its previous guidance.

That raised some hopes that U.S. companies may fare better during the recession than the market has feared. Meanwhile, investors got an additional lift after the Federal Reserve said it will extend the life of key programs aimed at loosening the credit markets and restoring stability to the financial sector.

But, that still wasn't enough to completely calm investors who are weary after huge swings in the market the past few months. Analysts said the volatility underscores how bear markets operate, with investors buying up stocks that look cheap and quickly selling when the market's sentiment turns negative.

"We've had a nice bounce back, and all you can do is hope it holds," said Todd Leone, managing director of equity trading at Cowen & Co. "These swings are part of the market now, but the underlying problems aren't going to suddenly go away."

The market remains uncertain about what might lie ahead, from how long the recession might last to more troubles in the struggling financial sector. Wall Street this week is wary about a number of reports due to be released, primarily Friday's jobs report that is widely considered the most important economic reading of the month.

In late afternoon trading, the Dow Jones industrial average rose 189.72, or 2.33 percent, to 8,338.81 after falling nearly 680 points on Monday. The Dow was up nearly 270 points in early afternoon trading Tuesday, but also dipped into negative territory.

The Standard & Poor's 500 index rose 22.59, or 2.77 percent, to 838.80, while the Nasdaq composite index gained 18.12, or 1.30 percent, to 1,416.19.

The Russell 2000 index of smaller companies rose 15.62, or 3.75 percent, to 432.69.