Broader stock indicators also advanced. The Standard & Poor's 500 index rose 23.91, or 2.82 percent, to 872.83, and the Nasdaq composite index rose 33.81, or 2.25 percent, to 1,539.71.

The Russell 2000 index of smaller companies rose 2.92, or 0.65 percent, to 451.32.

Declining issues outnumbered advancers by about 3 to 2 on the New York Stock Exchange, where volume came to 678.4 million shares.

Bond prices were mixed as some investors looked for the safety of government debt. The yield on the three-month Treasury bill, regarded as the safest investment around and an indicator of investor sentiment, fell to 0.75 percent from 0.77 percent Monday. The lower yield indicates an increase in demand. Meanwhile, the yield on the benchmark 10-year Treasury note rose to 3.80 percent from 3.69 percent late Monday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude fell 3 cents to $63.19 a barrel on the New York Mercantile Exchange.

Investors worldwide snapped up stocks after posting huge declines Monday on economic worries. Japan's Nikkei stock average jumped 6.41 percent and Hong Kong's Hang Seng index surged 14.4 percent — its biggest gain in 11 years — a day after plunging more than 12 percent. Britain's FTSE 100 rose 2.61 percent, Germany's DAX index jumped 11.28 percent, and France's CAC-40 rose 1.38 percent.

The disruptions in the normal flow of the credit markets over the past six weeks have produced widespread worries about the economy's ability to avoid a severe downturn. The evaporation in lending is making it difficult and more expensive for businesses and consumers to get loans.

But Monday saw the start of the Fed's efforts to revive lending in the commercial paper market, where companies turn for short-term loans. General Electric Co., for example, has said it would borrow money from the government. The Treasury has also begun to implement part of the government's $700 billion financial bailout plan by investing directly in some banks to give them a much-need source of fresh cash.

The government's extraordinary moves to help support borrowing and restore market confidence come as unease about the economy has buffeted trading. Some of Wall Street's gyrations since the mid-September bankruptcy filing of Lehman Brothers Holdings Inc. and the subsequent seizing up of the credit markets are tied to massive selling by hedge funds and mutual funds trying to raise cash for nervous investors.

Charlie Smith, chief investment officer at Fort Pitt Capital Group in Pittsburgh, said consumers are seeing the turmoil on Wall Street and curbing their spending while they wait to try to determine how far the market might fall and the depth of the economy's troubles.