-- Stocks recovered somewhat Tuesday as investors regained faith lawmakers will agree upon a financial bailout plan to stabilize financial markets.
In morning trade, the Dow Jones industrial average was up 104.34 points, or about 1%, to 104.34, helping to undo part of its 373-point decline Monday. But even after the slight rise in stock values, the Dow still remained 16% lower this year.
The broader Standard & Poor's 500 index also rose, adding 11.38 points, or about 1%, to 1218.47. And the tech-heavy Nasdaq composite index was up 28.07 points, or 1.3%, to 2207.05.
The biggest gainers were stocks in the airline, tires and rubber, and insurance industries.
Approval of the federal bailout plan is critical in the minds of investors since there are continual signs the underlying economy is weak, says Peter Cardillo of Avalon Partners. Investors are eager to see whether the plan, which involves spending $700 billion to quarantine bad mortgage-backed investments, will get approved in a form that helps speed up the economy's recovery.
Help may be needed as there are ongoing signs of economic weakness. For instance, retail sales are forecast to grow at their slowest pace in six years due to the strains of a weak job market and high energy costs, says the National Retail Federation.
And there's still fallout from the financial crisis for investors to deal with. American International Group, the insurance company bailed out last week by the federal government, said it will begin selling assets next week. The insurer plans to raise money to pay back the loan given to it by the federal government.
Some of the intense worries that flared up Monday eased Tuesday. The price of an ounce of gold, which spiked Monday as investors fled the dollar fearing inflation, fell 0.25% to $906.70. Meanwhile, the price of a barrel of oil for November delivery declined 59 cents to $108.78. Part of the decline was due to slightly lower fear of inflation. But a big factor behind Monday's $16 surge was that yesterday was the final day for the October contract, leading to increased volatility.
But investors don't want to see any delays in the government's moves to aid the economy, Cardillo says. "There are signs credit markets settled down a little bit. The key is to have confidence return to the financial markets in general," he says
Overseas, Britain's FTSE 100 fell 2.04%, Germany's DAX index slid 0.16%, and France's CAC-40 fell 1.28%. Japanese financial markets were closed Tuesday for a national holiday.