Stocks rocket up out of bear-market zone

A last-minute rally Tuesday pushed the Dow up more than 350 points in less than an hour. The other markets followed with strong recoveries from a late day slump.

The Dow Jones industrial average closed up 153.4 points, 1.4 percent, at 10,808.7.

The Standard & Poor's 500, which had dropped to its bear-market benchmark, ended up 24.7, 2.3 percent, at 1124. The Nasdaq closed up 69 points, 3 percent, at 2,404.8.

The abrupt rally started about 3:11 p.m. when the Dow was at 10,432.4. It closed up 376.3 at 4 p.m.

The markets had lost most of the day, despite a midmorning rally that evaporated in midafternoon trading. The S&P 500 was less than 1,100 for the first time in more than a year, falling below the price range that held since August and putting the gauge within 1 percent of a bear market, Bloomberg News reported. The index would complete a 20 percent decline from its April 29 high, the threshold for a bear market, by closing below 1,090.88 today.

The Dow had been down as many as 250 points in early morning and rose just as Federal Reserve Chairman Ben Bernanke started speaking to Congress. The drop of 18 percent from its peak is just shy of the threshold for a bear market.

In his testimony, Bernanke said the economy is weaker than the central bank expected and that poor job growth continues to undercut consumer confidence. He warned Congress that deep spending cuts may impede a recovery.

Bernanke also said the central bank is ready to take more steps to stimulate the economy. That could mean another round of asset purchases, a tactic known as quantitative easing, noted David Ader, chief government bond strategist at CRT Capital Group.

In early afternoon the House voted 352-66 to fund the government for six weeks, averting a shutdown at midnight, and giving Republicans and the White House time to resolve issues with 12 annual spending bills that lay out the day-to-day operating budgets for Cabinet agencies and departments.

The S&P index has fallen every month since April on mounting concerns about the strength of the U.S. economy and the possibility that the debt crisis in Europe could get worse. The stock market is thought to be forward-looking, reflecting investors' views of the economy in 6 to 9 months.

The S&P 500 has anticipated all 11 recessions in the U.S. economy since 1948, according to Sam Stovall, chief equity strategist at Standard & Poor's. Stocks usually begin their descent about 7 months before a recession starts and drop an average of 30 percent, he said.