updated 11/19/2008 7:07:47 AM ET 2008-11-19T12:07:47

Wall Street rebounded Tuesday in another turbulent session after investors rushed back into the market when the Standard & Poor's 500 index tested a 2003 low.

Major Market Indices

The market, which had been down four of the past five sessions, has been volatile amid worries about how long a recession might last. That has driven many retail investors to the sidelines, while big institutional traders like hedge funds keep major stock indexes vacillating.

That was the case on Tuesday when stocks rallied in the final hour of trading. At least some of the buying was because fund managers whose portfolios are tied to the S&P 500 had to find a replacement for Anheuser-Busch Cos. The brewer was officially removed from trading at the market's close after its takeover by Belgium's InBev SA was completed.

Investors also used the market's big drop earlier in the session as chance to scoop up undervalued stocks. There was some encouragement about corporate earnings after Hewlett-Packard Co. said fourth quarter and 2009 results will sail past Wall Street expectations.

Concerns the economy has fallen into a recession that could be the worst downturn in more than two decades weighed on investors after disappointing data on wholesale prices and the housing market.

The Labor Department reported that wholesale prices plunged a record amount in October, a drop that could indicate a rising threat of deflation. Meanwhile, homebuilders' confidence in a near-term housing recovery sank to a new all-time low this month, according to the National Association of Home Builders/Wells Fargo housing market index. NAHB Chairman Sandy Dunn said the report "shows that we are in a crisis situation."

The market is searching for a much-elusive bottom, and could yet again retest lows, analysts said. The major indexes continued to attempt some sort of recovery from October's devastating losses.

"We're going to need more strength from here for a period of time to develop a convincing story that the market has bottomed," said Alan Gayle, senior investment strategist at RidgeWorth Investments.

The Dow ended up 151.17, or 1.83 percent, to 8,424.75.

The Standard & Poor's 500 index rose 8.37, or 0.98 percent, to 859.12, after drifting toward its 2003 low of 818.69. The Nasdaq composite index added 8.37, or 0.98 percent, to 1,483.27. The Russell 2000 index of smaller companies fell 3.79, or 0.84 percent, to 447.51.

Volume on the New York Stock Exchange came to a light 1.6 billion shares. Low volume tends to skew the market's moves.

The uncertainty on Wall Street has kept Treasury bonds in high demand. The yield on the three-month T-bill, considered one of the safest assets around, rose to 0.11 percent from 0.10 percent late Monday. Longer-term Treasuries also moved higher, with the yield on the benchmark 10-year note falling to 3.53 percent from 3.66 percent.

Yields that low suggest that investors are willing to earn virtually nothing on their investments as long as their principal is preserved.

Analysts warn not to take Tuesday's gain as a sign the stock market is ready to stage a recovery.

"There is no enthusiasm on the buy side right now," said Joe Keetle, senior wealth manager at Dawson Wealth Management. "You got a little spurt of it today because Hewlett-Packard's earnings were good and their outlook was good."

There also remains uncertainty in the financial system as Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke were grilled on Capital Hill about their management of a $700 billion financial bailout. Paulson told the House Financial Services Committee that the U.S. has "turned a corner" in averting a financial collapse, but more work needs to be done.

Paulson also said during his testimony that the administration remains firmly opposed to dipping into the government's financial bailout fund for a $25 billion rescue package for Detroit's Big Three automakers, no matter how badly they need the help.

"There are other ways" to help them, Paulson said.

Executives of General Motors Corp., Ford Motor Co. and Chrysler LLC and the head of the United Auto Workers union testified at a Senate Banking Committee hearing about a potential bailout. The automakers, seeking $25 billion in government aid, have the backing of Democratic congressional leaders, but the Bush administration and Republican lawmakers are against the proposed bailout.

The consensus among the three automakers is that if even one of the companies failed it would be a catastrophe to the industry. Ford shares fell 4 cents, or 2.3 percent, to 1.68; GM fell 9 cents, or 2.8 percent, to $3.09.

Chrysler CEO Robert Nardelli said during his testimony that the automaker needs immediate federal help or its cash could fall below of the amount needed to stay in business. The company is owned by an investor group that includes private-equity firm Cerberus Capital Management.

Investors found some encouragement in an unexpected announcement from Hewlett-Packard Co. that fourth-quarter and 2009 earnings will come in above Wall Street projections. The results signal HP, the world's largest-maker of personal computers, is weathering the economic crisis that has siphoned off sales at other technology companies.

HP vaulted $4.25, or 14.5 percent, to $33.59.

Yahoo Inc. shares spiked 92 cents, or 8.7 percent, to $11.55 after founder Jerry Yang announced that he was stepping down as chief executive of the Internet company. Many analysts believe the departure will accelerate an overhaul of Yahoo and lead to a sale to Microsoft.

The dollar fell against most other major currencies. Gold prices also fell. Light, sweet crude fell $2.09 to settle at $54.95 on the New York Mercantile Exchange, the lowest since January 2007.

In Asian trading, Japan's Nikkei index fell 2.28 percent, and Hong Kong's Hang Seng Index fell 4.54 percent. In European trading, Britain's FTSE 100 rose 1.47 percent, Germany's DAX index rose 0.49 percent, and France's CAC-40 rose 1.11 percent.

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