Stocks bounce back

NEW YORK (CNNMoney.com) -- Stocks bounced back Tuesday, finding some momentum after two rough sessions sparked by worries about the economy and interest rate policy ahead of next week's key Fed meeting.

Investors took in stride a morning speech from Federal Reserve Chairman Ben Bernanke, as it did not touch on interest rate policy.

The Dow Jones industrial average (up 121.93 to 13,249.78, Charts) added more than 100 points, or about 0.9 percent more than after 2-1/2 hours into the session, while the broader S&P 500 (up 10.95 to 1,462.65, Charts) index gained 0.7 percent. The tech-fueled Nasdaq composite (up 22.04 to 2,581.15, Charts) rose 0.8 percent.

Strong global markets, upbeat news from McDonald's and Ericsson and a recovery in financials and other recently battered sectors all contributed to a stock advance Tuesday.

Investors were also perhaps willing to step back in after Friday's steep selloff - following a weak August jobs report - and Monday's choppy session.

Stocks struggled Monday after comments from a slew of Fed officials seemed to cool bets that the central bank will announce a big interest rate cut at next week's policy meeting.

Investors looking for further clues about Fed policy found no guidance in a Tuesday morning speech from Bernanke. Speaking to the German central bank, the Fed chairman discussed the history of the global savings glut and developments in current account imbalances.

Stocks have been particularly volatile over the past few weeks, as investors have worried about how the credit crisis, rise in mortgage defaults and housing collapse will hit consumer spending and the broader economy.

"The consumer has led the economy for the better part of 50 quarters, so the worry is that this could be the next shoe to drop after the slowdown in housing," said J.J. Burns, president of J.J. Burns and Company.

Stock market trading will remain volatile through next week's Fed meeting, Burns said, and through the end of the quarter.

Tuesday also marks the six-year anniversary of Sept. 11. The New York Stock Exchange, located just blocks away from the site of the terror attacks, never opened for trading that day. Markets remained shuttered for the rest of the week, the longest closing of the NYSE since World War II.

When financial markets reopened on Monday Sept. 17, the Dow Jones Industrials tumbled by 684.81 points, the biggest one-day point drop of all time, for a decline of 7.1 percent.

U.S. stock gains were broad based Tuesday, with 23 out of 30 Dow issues rising, led by McDonald's (up $2.20 to $52.35, Charts, Fortune 500).

The fast-food retailer reported that August sales at stores open a year or more rose 8.1 percent, versus forecasts for a rise of 3.7 percent.

Other big Dow gainers included Hewlett-Packard (up $0.92 to $49.92, Charts, Fortune 500), JP Morgan (up $0.38 to $44.31, Charts, Fortune 500) and General Motors (up $1.10 to $30.31, Charts, Fortune 500).

Ericsson (up $1.70 to $37.95, Charts) rose after its CEO said that the company is gaining market share and that the global market for wireless network technologies will grow about 5 percent this year, Reuters reported.

Market breadth was positive. On the New York Stock Exchange, winners topped losers 7 to 3 on volume of 420 million shares. On the Nasdaq, advancers topped decliners 2 to 1 as 600 million shares traded hands.

An industry report released Tuesday morning showed that the home price slump is expected to continue through 2008.

In other news, the July trade deficit narrowed to $59.2 billion from an upwardly revised $59.4 billion in the previous month. Economists expected a reading of $59 billion, according to a survey by Briefing.com.

Strength in global markets gave a lift to U.S. stocks, with Asian markets ending higher and European markets rising in the late afternoon.

Treasury prices fell, raising the yield on the 10-year note to 4.34 percent from 4.32 percent late Monday. Bond prices and yields move in opposite directions.

In currency trading, the dollar fell versus the euro and was little changed against the yen.

U.S. light crude oil for October delivery rose 11 cents to $77.60 a barrel on the New York Mercantile Exchange.

COMEX gold for December delivery rose $7.40 to $719.60 an ounce.