Wall Street Bounces Back in a Big Way

Updated from 4:07 p.m. EDT

Stocks in New York closed with strong gains Tuesday, recouping some of the heavy losses suffered in the previous session's massive selloff.

The major indices spent the entire day in rally mode Tuesday, adding to their early gains as the day progressed. The Dow Jones Industrial Average jumped 485.21 points, or 4.7%, at 10,850.66, and the S&P 500 added 58.34 points, or 5.3%, to 1164.73. The Nasdaq climbed 98.6 points, or 5%, to 2082.33.

On Monday, stocks got crushed after the House of Representatives voted down the Treasury Department's $700 billion financial-sector stabilization plan. The Dow plunged 777 points, or 7%, its worst single-day loss ever in terms of points and its worst percentage loss since Sept. 17, 2001. The S&P 500 gave up 8.8%, and the Nasdaq fell 9.1%.

Traders had anticipated passage of the Treasury's program, which would provide liquidity in installments to financial firms in exchange for mortgage-backed securities and other hard-to-value assets. Lawmakers are working to put together another proposal and quell the market's anxiety.

Phil Roth, chief technical analyst at Miller Tabak, had expected an upside open following Monday's big drop. He pointed out that the financial sector, which has been at the center of market turmoil, held lows established on Sept. 18. Those lows were higher than the ones reached in mid-July, which is encouraging, said Roth. Nevertheless, "I think we've got a long way to go before we can say we have a bottom for a whole bull market," he said.

"Once we get the stupid bill passed ... the market will have a little hoopla. And [then], people will say, 'Oh my God, we're in a recession.' That's the next shoe to drop, but that will take a while." Roth said that a lack of investment buying is the biggest problem the market faces, and long-term interest rates need to decline before stocks enter a bull market.