NEW YORK (TheStreet) -- The S&P 500 retreated from session highs Tuesday afternoon as an earlier rebound in oil prices quickly ran out of steam.

Big swings in stock prices saw the S&P 500 up 0.36% by early afternoon after a late-morning surge. The Dow climbed 0.48% and the Nasdaq slid 0.08%. The Chicago Board Options Exchange Volatility Index spiked 2.5%.

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Crude oil prices were edging lower with West Texas Intermediate down 0.66% to $55.54 in a volatile trading session which saw the commodity fall more than 3% earlier in the day. 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 Exxon Mobil (XOM) - Get Exxon Mobil Corporation Report , Chevron (CVX) - Get Chevron Corporation Report and BP (BP) - Get BP p.l.c. Sponsored ADR Report also surged, while the Energy Select Sector SPDR ETF (XLE) - Get Energy Select Sector SPDR Fund Report spiked 2%. Mid-cap oil-drilling companies were also gaining. Transocean (RIG) - Get Transocean Ltd. Report added 4.1%, DenburyResources (DNR) - Get Denbury Resources Inc. Report climbed 8.2% and Nabors Industries (NBR) - Get Nabors Industries Ltd. Report moved 4.9% higher.

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

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"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."

The sudden turnaround in market sentiment Tuesday 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.

Boeing (BA) - Get Boeing Company Report shares added 2.2% following a 25% dividend increase. The company also raised its repurchase authorization to $12 billion.

3M (MMM) - Get 3M Company Report shares popped more than 2.3% as the company raised its first-quarter dividend by 20% and reaffirmed its 2015 earnings guidance.

Priceline (PCLN) dropped 2.2% after being removed from Goldman Sachs' "Conviction Buy List." A "buy" rating was maintained. Monster Beverage (MNST) - Get Monster Beverage Corporation (MNST) Report climbed 3% following an upgrade to "buy" from Credit Agricole.

VeriFone Systems (PAY) climbed nearly 5% after reporting fourth-quarter net income of 44 cents a share, 3 cents higher than analysts' estimates. Revenue increased 12.6% from the year-ago quarter.

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--Written by Keris Alison Lahiff in New York.