The recent sell-off in stocks arrived amid a seize-up in lending, as banks and investors around the world grew fearful about the creditworthiness of other institutions following the September bankruptcy of investment bank Lehman Brothers Holdings Inc. and the subsequent failure of thrift bank Washington Mutual Inc. Tight lending conditions make it harder and more expensive for businesses and consumers to get a loan, a headwind for economic growth.

Robert Dye, senior economist at PNC Financial Services Group, said the government's actions likely will help revive the credit markets, where many businesses turn to fund day-to-day operations, but that investors' focus in the past month about the soundness of the financial system had left little time to address other concerns about trouble in the economy.

"These steps are not going to turn the real economy on a dime," he said of the government intervention. "The two keys to the fundamental economy right now are the job market and the housing market and both of those remain distressed."

"There isn't one bottom here. We're talking about multiple events. There will be a bottom in financial market and another in the labor market and one in the housing market. And they're not going to all line up," Dye said.

Many of the nine banks the government identified as ones in which it will invest advanced Tuesday. Among them, Citigroup Inc. rose $2.87, or 18 percent, to $18.62, while Bank of America Corp. rose $3.74, or 16 percent, to $26.53. JP Morgan Chase & Co. fell $1.28, or 3.1 percent, to $40.71.

Intel Corp. fell $1.06, or 6.2 percent, to $15.93 ahead of its quarterly earnings report, which arrived after the closing bell on Wall Street. The chip maker's earnings topped Wall Street's forecast though the company warned the financial crisis is making it difficult to project results and that its fourth-quarter sales could fall short of Wall Street estimates.

The Russell 2000 index of smaller companies fell 16.24, or 2.84 percent, to 554.65.

Asian and European markets shot higher. Hong Kong's Hang Seng index rose 3.19 percent, after a more than 10 percent increase on Monday. Japan's Nikkei index, catching up from the country's market holiday Monday, jumped 14.15 percent — the largest increase ever.

In Europe, Britain's FTSE 100 jumped 3.23 percent, Germany's DAX index rose 2.70 percent, and France's CAC-40 rose 2.75 percent.