Stocks pull it together

NEW YORK (CNNMoney.com) -- Stocks managed modest gains Tuesday, recovering at the end of a choppy session in which worries about the economy and a run up in oil prices kept investors on edge.

The Dow Jones industrial average (up 17.38 to 12,139.09, Charts) added 0.1 percent, according to early tallies, while the broader S&P 500 (up 4.69 to 1,386.59, Charts) index added almost 0.4 percent.

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The Nasdaq composite (up 6.68 to 2,412.60, Charts) added 0.3 percent.

Weak morning reads on manufacturing, housing and consumer confidence dragged on stocks in the morning. Afternoon comments from Fed chair Ben Bernanke added to the market's malaise.

But investors turned it around near the close, enabling stocks to end modestly higher.

Treasury prices rose, lowering the corresponding yields. The greenback slumped versus the euro and was little changed versus the yen.

Oil prices rose and gold prices fell.

Here's a look at what was moving near the close.

The major gauges swayed on both sides of unchanged throughout the morning, as investors weighed weak readings on durable goods orders and consumer confidence, a mixed report on housing, and continued to show caution after Monday's big slide.

The early afternoon saw stocks slip as investors considered comments on the economy from Federal Reserve Chairman Ben Bernanke.

However, declines were modest considering that Monday saw the biggest sell-off on Wall Street in four months.

By the afternoon, the tone improved, and investors again tried to push stocks higher.

If nothing else, the lack of further selling after Monday's big loss was probably significant, said Timothy Ghriskey, chief investment officer at Solaris Asset Management.

"I think it's a healthy sign that we didn't see any follow through to yesterday and that it doesn't appear to be a major market correction," he said.

While the morning's economic news was fairly negative, the flip side of that is that it increases speculation that the Federal Reserve will cut interest rates eventually, he said.

In addition, Fed chief Bernanke's testimony was "hawkish as expected," he said.

Stocks slumped Monday, with the Dow posting its biggest one-day percentage drop since July, and the Nasdaq and S&P 500 seeing their biggest one-day percentage drops since June.

The decline was caused partly by higher oil prices, worries about the weaker dollar and a cautious outlook from Wal-Mart Stores. But the selloff was also a reflection of how far stocks have risen since bottoming out last summer, analysts said.

Prior to Monday's selloff, the Nasdaq had risen 11.6 percent year-to-date, the Dow had gained 14.6 percent in 2006 and the S&P 500 had gained 12.2 percent year-to-date.

Investors may have also been worried about the slew of economic news that is due this week, starting with Tuesday's trio of reports.

A report released after the start of trading showed that the median price of existing homes sold in October posted the biggest drop on record, falling for the third month in a row.

However, overall existing home sales rose to a 6.24 million unit rate in October from an upwardly revised 6.21 million unit rate in September. Economists thoughts sales would fall to a 6.14 million unit rate.

A separate report showed that consumer confidence fell to 102.9 in November from an upwardly revised 105.4 in October, missing the expectations of economists, who thought the index would rise to 106.

An earlier government report showed that durable goods orders for October saw the biggest drop in more than six years.

The overall impact of the three reports was to confirm that the economic slowdown is being felt across a variety of sectors.

That had a mixed impact on stock sentiment, both raising worries about the economy and raising bets that the Fed will need to start cutting interest rates sometime next year.

"In general, the sense is that the economy is reasonably soft here," said Stephen Stanley, chief economist at RBS Greenwich Capital. "We've got data on manufacturing, housing and consumer confidence that suggest this."

Stanley said that at the moment, the strongest part of the economy appears to be the consumer, as the weekend reports about "Black Friday" and the start of the holiday retail sales period have suggested.

Stock and bond investors, he said, are struggling to figure out where the economy is going. "There's a debate between the people who see the negative reports, like what we have today, and think things are going to get worse, and people who see the negatives, but think it will slowly get better."

The afternoon brought comments from Ben Bernanke. In a speech prepared for delivery before the National Italian American Foundation in New York, the Fed chief said that the economy is roughly slowing at the pace the central bank had expected this summer, reflecting the slowdown in the housing market.

He also said inflation has moderated of late, due in part to the decline in oil and gas prices. However, the level of the so-called "core" inflation, which excludes food and energy prices, has remained "uncomfortably high."

Treasury bond prices rose, on bets that the slowing economy means the Fed is likely to cut rates next year. The advance lowered the yield on the 10-year note to 4.50 percent from 4.53 late Monday. Treasury prices and yields move in opposite directions.

A number of the big stocks that led the selloff Monday continued to weigh Tuesday, including Dow components Intel (down $0.08 to $20.94, Charts), General Motors (down $0.44 to $29.92, Charts), Home Depot (down $0.27 to $37.10, Charts) and JP Morgan (down $0.42 to $46.21, Charts).

Countering that was strength in select blue chips, including Boeing (up $0.61 to $87.98, Charts), which rose on news that it has received a $5.7 billion order from Air Berlin for 85 jets to be delivered between 2007 and 2014.

Dow stock Exxon Mobil (up $1.68 to $74.15, Charts) gained 2.3 percent, rising with the price of oil.

A number of other oil stocks gained, too, lifting the Amex Oil (up 17.69 to 1,178.79, Charts) index by 1.5 percent.

Cisco Systems (up $1.22 to $27.02, Charts) and Apple (up $2.21 to $91.75, Charts) were among the tech stocks bouncing back, boosting the Nasdaq.

In deal news, Spain's Iberdrola said it will buy Scottish Power (down $0.02 to $57.58, Charts) for $22.5 billion in cash, creating Europe's third-biggest utility.

Market breadth was mixed. On the New York Stock Exchange, winners beat losers five to three on volume of 1.33 billion shares. On the Nasdaq, decliners and advancers were roughly even on volume of 1.70 billion shares.

U.S. light crude oil for January delivery rose 67 cents to $60.99 a barrel on the New York Mercantile Exchange.

In currency trading, the dollar slumped to a fresh 20-month low versus the euro and was barely changed versus the yen.

COMEX gold fell $3.30 to $637.30 an ounce.

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