Bulls Make Their Comeback

Stocks had floundered over the past five sessions after a massive selloff a week ago unnerved investors around the world. Despite Tuesday's rally, the Dow is still down 256 points, or 2.1%, for the year. Meanwhile, the S&P 500 has fallen 23 points, or 1.6%, for the year. The Nasdaq has given back 30 points, or 1.2%, for 2007.

Tuesday's climb followed a rally in Asian markets. Earlier, U.S. Treasury Secretary Henry Paulson said during a visit to Tokyo that the global economy is strong and that reforms in China would help mitigate market volatility.

Tokyo's Nikkei rose 1.2%, Hong Kong's Hang Seng added 2.1%, and China's Shanghai and Shenzhen 300 climbed nearly 2%.

The rebound overseas came as the Japanese yen posted the biggest drop against the dollar in three months and had the largest decline against the euro in 17 months.

A rising yen in recent days had prompted market worries that carry trades, in which investors borrow money in low-yielding securities like the yen and invest it in higher-yielding assets, were unwinding. Such an unwinding could present a liquidity crisis.

Markets across Europe mirrored the rise in Asia. Frankfurt's Xetra Dax rose 0.9%, the Paris Cac 40 was higher by 1%, and London's FTSE 100 tacked on 1.3%.

Back in the U.S., Federal Reserve Chairman Ben Bernanke addressed the Independent Community Bankers Association in Hawaii, but he didn't make any comments on the markets or the economy.

Earlier, former Fed Chairman Alan Greenspan told Bloomberg that he sees a one-third probability the U.S. economy will fall into a recession this year. His comments follow remarks last week that while "it is possible we can get a recession in the latter months of 2007, most forecasters are not making that judgment and indeed are projecting forward into 2008."