Stocks were on their way back up again as investors shrugged of some disappointing economic data and kept an optimistic outlook about President-elect Obama's economic-stimulus plan.
"In the very near term, there's just a lot of optimism," Jason Roney of Sharmac Capital told CNBC. "There's a perception in the very near term that the worse the data is, the better the stimulus will be," he said.
The Dow Jones Industrial Average was back up about 100 points, after a lot of wobbling and a brief dip into negative territory earlier.
This follows Monday's session, when stocks snapped a three-day winning streak, sending Santa and his year-end rally packing.
One of the day's dips came after the Federal Reserve released minutes from its historic meeting, which indicated that the Fed worried that rate cuts weren't enough for the current downturn.
In the day's economic news, pending-home sales fell 4 percent in November to the lowest level since the National Association of Realtors started keeping track in 2001, and factory orders fell for a fourth straight month. Meanwhile, the ISM services index rose unexpectedly in Decemberto 40.6 from 37.3 in November, though the index remains under 50, which indicates contraction.
Energy was also in focus. Natural gas futures rose more than 1 percent after Russian gas supplies to some EU countries fell sharply.
At the same time, US light, sweet crude hit a one-month high above $50 a barrel amid concerns about situations in the Mideast and Russia, though it later fell back around $48 a barrel.
Helping to buoy the market, technology stocks advanced amid the thinking that the huge cashpiles some big caps are sitting on will help them weather the downturn better than other companies.
Dell , Hewlett-Packard and Research In Motion rose more than 5 percent.
Apple shares initially rose after an upgrade from Oppenheimer, but the stock quickly retreated as MacWorld concluded without any new product announcements. One thing that did emerge was that Apple will roll out variable pricing for digital songs on iTunes. Songs will be priced between 79 cents and $1.29. Previously, all songs were 99 cents.
Dow Chemical gained after the company said it would pursue its legal options over a a failed joint venture with Kuwait's Petrochemical Industries. The deal had been a key part of the company's growth strategy.
In the financial sector, Merrill Lynch's brokerage head Robert J. McCann resigned just as the company's acquisition by Bank of America was completed. McCann's departure can be related to continued tension with Merrill president John Thain, sources told CNBC.
McCann's departure could lead to a mass exodus of brokers.
And General Electric's finance arm plans to sell $10 billion in FDIC-backed debt, the largest sale under the government loan guarantee program so far. (GE is the parent company of CNBC.)
A day after dismal December auto sales that nonetheless beat analyst expectations, Toyota Motor said it was suspending production in Japan for 11 days.
General Motors said its sales in China for 2008 were up 6 percent but slowing.
Logitech International slipped after the world's largest computer mouse manufacturer cut its 2009 forecast and said it would be cutting jobs.
Shares of Talbot's jumped more than 30 percent after the women's apparel retailer said it has secured a total of $150 million in committed lines of credit.
Retailers will be in focus this week as big chains report their December sales, which is expected to show one of the worst holiday seasons on record.
"I think we are going to see a whole new color of ugly," retail analyst Patricia Edwards of Storehouse Partners, told Reuters.
Wal-Mart , the star of the season, is expected to show a 2.8 percent increase in December same-store sales, while teen and children's retailers are expected to have done the worst with a 15-percent decline. Overall, retail sales are expected to have dropped 7.1 percent, according to Thomson Reuters.
Investors are bracing for a new wave of store closings and bankruptcies in 2009. The International Council of Shopping Centers estimates that 73,000 stores will close in the first half, following 148,000 in all of 2008.
TUESDAY: ISM services index; factory orders; pending-home sales; Fed minutes; MacWorld (Jan. 5-9)
WEDNESDAY: Weekly mortgage applications; ADP employment report; weekly crude inventories; Earnings from Constellation Brands, Family Dollar, Monsanto and Bed, Bath & Beyond
THURSDAY: ECB and BOE rate decisions; Chain-store sales; weekly jobless claims; consumer credit; Consumer Electronics Show begins (Jan. 8-11)
FRIDAY: Jobs report; wholesale trade; Earnings from KB Home
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