NEW YORK (MarketWatch) -- U.S. stocks rose sharply Tuesday as Wall Street reclaimed a portion of the prior day's massive losses while waiting for what investors hope will be economic reassurances from the Federal Reserve.
Investors are "crossing their fingers that Ben is going to come to the rescue," said Nick Raich, director of research at Key Private Bank, referring to Federal Reserve Chairman Ben Bernanke.
The Fed will do what it can to "try to calm the markets," said Raich, who said one option would have the central bank opting to "continue to buy back Treasurys but not expand its balance sheets."
The Federal Open Market Committee's policy statement is scheduled for release Tuesday afternoon, with investors looking for any signs of what the Fed might do to bolster the U.S. economy. .
After relinquishing 634.76 points, or 5.6%, in Monday's battering -- the sixth-largest point loss in its history -- the Dow Jones Industrial Average (DJI) rallied back as much as 243 points, and was lately up 168.96 points, or 1.6%, to 10,978.81, with all but three of its 30 components rising.
Wall Street's recent havoc is "giving investors flashbacks to the nightmare of 2008. However, unlike Freddie Krueger, 2008 isn't back," said Matt Freund, senior vice president of investment-portfolio management at USAA Investment Management Co.
"Unlike three years ago, corporate balance sheets are healthy, liquidity is plentiful and the level of speculative investing is down dramatically," said Freund, who attributed the current market volatility to "the ongoing situation in Europe and the potential for a slowing global economy."
The S&P 500 Index (SPX) added 25.37 points, or 2.2%, to 1,144.42, with financial firms faring best of the index's 10 industry groups after getting socked the hardest on Monday.
The Nasdaq Composite Index (RIXF) climbed 73.05 points, or 3.1%, to 2,430.37.
For every stock falling nine gained on the New York Stock Exchange, where 1 billion shares exchanged hands as of 1:30 p.m.
The recent decline in equities, which last week had the market in a correction mode, followed by then Monday's stunning drop involves "a market pricing in increased chances of debt default out of Europe," said Raich at Key Private Bank.
"Economic activity will slow in Europe because of increased austerity measures, but right now the market is pricing in off the cliff. If we can avoid that, if the [European Central Bank] can manage to get through, then the market is oversold," said Raich.
Copyright © 2011 Dow Jones Newswires
