In Wall Street's continuing game of stock-market roulette, share prices soared in the last hour of trading Tuesday, sending the Dow Jones industrial average up almost 900 points, its second-biggest point gain on record.
But if investors hope the rally signals a change in the market's fortunes, they may be disappointed.
The Dow jumped 889.35 points, or 10.9%, to 9,065.12. It was the blue-chip index's sixth-biggest one-day percentage gain ever.
The advance was the latest in the series of wild market swings that have made the market's current swoon even more unnerving for investors. The Dow, which is down 16% this month even after Tuesday's rise, has recorded triple-digit gains or losses in all but two of the month's 20 trading days so far.
And Tuesday's gain by the Dow was the biggest only since Oct. 13, when the Dow jumped 936 points, or 11.1%.
There was no apparent reason for the latest surge -- which came on a day when the economic news was mostly gloomy -- adding to a feeling among some market watchers that the rally might have been little more than a head fake.
"I'm very hesitant to read anything significant into it," said Richard Weiss, chief investment officer for City National Bank in Beverly Hills. "I'm not convinced that this is the end of the downturn, unfortunately."
The rally came as the Federal Reserve began a two-day meeting in Washington. Investors are betting that the central bank will cut its benchmark lending rate today to 1% from 1.5%, its lowest level since 2004.
Rate cuts are intended to stimulate lending, a top priority for central bankers around the world as they try to thaw out frozen credit markets and avert a deep and long-lasting recession.
In addition to gushing liquidity from the Federal Reserve, the Treasury Department started this week to disburse the first of potentially $700 billion to banks and certain other companies that are short of capital. Administration officials have been exhorting banks to start using the capital to make loans.
"What we're trying to do is get banks to do what they are supposed to do, which is support the system that we have in America," White House spokeswoman Dana Perino said Tuesday. "And banks exist to lend money; that's how they make money."
For months, the Fed has been devising ways to funnel cash into problem areas of the credit markets in an effort to keep the economy going. This month the central bank said it would start buying commercial paper -- short-term debt issued by some companies to help fund daily operations.
"The nature of the financial crisis has changed over time and the Fed has been flexible," said Vincent Reinhart, former director of the Fed's division of monetary affairs and now a fellow at the American Enterprise Institute. "The commercial paper facility is extremely important" among the efforts to end the crisis.
But there is a lag between when the programs are announced and when they are implemented. It took three weeks for the commercial paper program to get up and running Monday. How much the Fed has purchased will be released this week.
The global credit markets continued to show signs of thawing a bit as indicators of interest rates on loans between banks again fell slightly. However, yields on corporate bonds rose, signaling that investors are expecting tough times for U.S. companies. That view was bolstered by the reports released Tuesday.
The Conference Board, a private research group, said its gauge of consumer sentiment fell to 38 in October. That was well below analysts' expectations and down from a revised 61.4 in September. It was the lowest reading since the group began tracking consumer sentiment in 1967 and was a bad omen for consumer spending, which makes up about two-thirds of U.S. economic activity. It also reinforced worries that the nation was sliding into a potentially lengthy recession.
Investors also digested a steep drop in the Standard & Poor's/Case-Shiller index of housing prices, which fell 16.6% in August compared with a year earlier. Disarray in the U.S. housing market has been a major driver of the current global credit crisis.
Oil prices, which have been dropping sharply, were little changed. Light, sweet crude for December delivery closed at $62.73, down 49 cents.
In the stock market, winners outnumbered losers by 4 to 1 on the New York Stock Exchange, a small margin given the size of the day's gain.
The broad Standard & Poor's 500 index gained 91.59 points, or 10.8%, to 940.51, and the tech-heavy Nasdaq composite rose 143.57 points, or 9.5%, to 1,649.47.
Indexes that track shares of small companies also rose, but not as sharply. The Russell 2,000 small-cap index gained 7.6%.
Even with the day's dramatic increase, the Dow is still down 36% from its all-time high of a year ago. And analysts note that so-called bear-market rallies aren't uncommon.
"I'd rather have much less volatile moves and more of a steady improvement" in the market, said Paul Kandel, senior portfolio manager at Sentinel Asset Management. "That said, it's nice to see that the market can go up again."
Martin Zimmerman reporting from los angeles,
Maura Reynolds reporting from washington