NEW YORK – A late-afternoon surge capped another wild day on Wall Street Tuesday, bringing the S&P 500 back from the brink of entering a bear market. Stocks jumped on reports that European officials were working on a joint effort to prop up the region’s struggling banks.
The Dow Jones industrial average closed with a gain of 153, erasing a 200-point deficit in the last 40 minutes of trading. It was down for the whole day before turning positive just 10 minutes before the closing bell.
Indexes opened sharply lower as traders worried that Greece could be edging closer to default. Stocks pared their losses at midday after Federal Reserve Chairman Ben Bernanke told a congressional panel that the central bank could take more steps to stimulate the economy, then slumped again in the afternoon.
At 3:25 p.m., the market began rising quickly after several news outlets reported that European financial ministers were working on a way to coordinate their efforts to support European banks, as they did during the financial crisis in 2008. Worries that U.S. and European banks could get hammered by a Greek default have been a major concern among investors.
“Right now fear is trumping fundamentals and people are buying on nothing more than rumors,” said Mark Lamkin, head of Lamkin Wealth Management. “It’s not business risk that the market is concerned with, it’s systemic risk. If there truly is a solution to Europe’s problems, then we’ll set the stage for a nice rally.”
The Dow closed with a gain of 153.41, or 1.4 percent, to 10,808.71.
The Standard and Poor’s 500 rose 24.72, or 2.2 percent, to 1,123.95. It had been down as many as 24 points in morning trading, 20 percent below its April peak. Had the index closed with a decline that size it would have met the typical definition of a bear market.
The technology-focused Nasdaq composite rose 68.99 points, or 3 percent, to 2,404.82.
Smaller stocks rose much more than the overall market. The Russell 2000 index of small companies gained 39.15, or 6.4 percent, to 648.64.