NEW YORK (TheStreet) -- Markets couldn't make up their minds on Tuesday. Stocks wiped out gains in the final market hour after a whiplash session which saw the Dow Jones Industrial Average trading in a 360-point range.

The Chicago Board Options Exchange Volatility Index, sometimes known as the 'fear' index, spiked 6% as investors were torn between stabilizing oil prices, hopes that the Federal Reserve will maintain its current monetary policy, and Russia teetering on recession in the face of tumbling natural gas prices.

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"We've got a market here that's looking a little tired as it nears its final two weeks of the year," said Sean Lynch, Wells Fargo managing director of global equity research, in a call. "You have the problems in Russia, you have concerns over lower oil prices and then you have the FOMC meeting tomorrow." The FOMC, or 

The S&P 500 closed 0.84% lower, the Dow fell 0.64% and the Nasdaq tumbled 1.2%.

Crude oil prices appeared to have found a bottom with West Texas Intermediate flat at $55.95 a barrel. Prices skidded on Monday after key OPEC members recommitted to leaving production levels unchanged despite global oversupply.

"If you look at a technical chart, the long-term price chart of crude oil, the low-$50s (roughly that $53-$55 range) coincides with long-term support," said LPL Financial investment strategist Anthony Valeri over the phone. "It could just be a technical bounce but it's something the markets are getting excited about."

Energy shares rallied as oil prices leveled. Talisman Energy (TLM) was the best performer, rocketing 48% higher after its board confirmed and recommended Repsol's (REPYY) plans to purchase it for $8.3 billion, or $8 a share.

Large-cap oil giants Chevron (CVX) - Get Chevron Corporation Report and BP (BP) - Get BP p.l.c. Sponsored ADR Report also climbed, while the Energy Select Sector SPDR ETF (XLE) - Get Energy Select Sector SPDR Fund Report spiked 0.89%. Mid-cap oil-drilling companies were also gaining. Transocean (RIG) - Get Transocean Ltd. Report added 3.3%, DenburyResources (DNR) - Get Denbury Resources Inc. Report climbed 7.3% and Nabors Industries (NBR) - Get Nabors Industries Ltd. Report moved 2.2% higher.

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Lindsey Piegza, Sterne Agee chief economist, said, however, it was too early to call a bottom.

"We continue to hear comments from OPEC about not cutting production, we continue to see very sluggish numbers internationally and we don't expect a turnaround in the international economy any time soon," she said. "That spells continued downward pressure on energy prices, so I think it's too soon to call for a bottom but certainly investors with a longer-term strategy are finding a lot of good bargains at this point."

An earlier surge in stocks was also fueled by the latest economic data underscoring the belief the Federal Reserve will leave monetary policy unchanged for a longer time period. The Fed began its two-day meeting Tuesday with an announcement due midafternoon on Wednesday.

"There's a little bit of optimism that the Fed is going to recognize that the economy is still very much on uneven footing and continue to provide very accommodative policy with language that continues to reiterate their commitment," said Piegza.

Among the weaker-than-expected data out this morning, U.S. housing starts for November slipped 1.6% to 1.03 million compared to an upwardly revised 1.7% increase in October. Economists had expected 1.04 million housing starts over the month. The Markit PMI manufacturing index slowed to a 11-month low of 53.7 in December. Though still signaling expansion, the reading was on par with January levels when extreme winter weather hit the economy hard.

Russia weighed on sentiment, though, as Wall Street feared the country's tanking markets and currency were indicative of a broader global slowdown.

"The past couple days we've seen double-digit declines in the [ruble] and that's a huge move for currency traders," said Lynch, adding that with pressure on other emerging countries' currencies "there's always the fear of contagion."

Overnight, Russia's central bank enacted an emergency 650-basis-point interest rate hike to 17% after the ruble suffered its worst intraday fall since the Russian financial crisis of 1998. The ruble climbed 5.7% against the dollar on Tuesday.

U.S.-listed Russian stocks tanked. Search engine Yandex (YNDX) - Get Yandex NV Class A Report slid 4.6%, payments provider Qiwi (QIWI) - Get Qiwi Plc Sponsored ADR Class B Report fell 13.1%, VimpelCom (VIP) fell 2.2% and Mobile TeleSystems (MBT) - Get Mobile TeleSystems PJSC Sponsored ADR Report dropped 10.8%.

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--Written by Keris Alison Lahiff in New York.