Investors went on a late-day buying spree, scooping up shares of beaten-down stocks and sending the major indexes soaring 7-8 percent.
It was clear from the opening bell that volatility would reign once again: The Dow Jones Industrial Average shot up more than 200 points in the first minute of trading and kept going to about 300. A confidence report chipped away at those gains until there was virtually nothing left. By early afternoon, the blue-chip index, along with the S&P 500 and Nasdaq, were back up and soaring to session highs.
The day's advances were attributed to bargain hunting and expectations that the Federal Reserve will announce a rate cut tomorrow.
Casting a pall over the rally attempts, the Conference Board reported its gauge of consumer confidence plunged to a record low of 38 in October from an upwardly revised 61.4 in September. The October reading fell short of the consensus estimate of 52 and even the most pessimistic forecast in the survey, which was 45.
Asian markets posted solid gains -- Japan led the way with a 6 percent jump. European markets also gained; Germany's DAX was the standout, soaring 11 percent driven by component Volkswagen after Porsche took a larger stake in the company. Earlier this month, a Barron's article seemed to encourage shorting Volkswagen as the stock was likely to go down when Porsche's stake got over 50 percent.
VW shares, which have quadrupled since Friday's close, added another 80 percent in the current session, briefly making VW the largest company by market cap, eclipsing ExxonMobil.
The stock's surge triggered a short squeeze, and the buzz was that Morgan Stanley, which dropped 12 percent, and Goldman Sachs, which skidded 6 percent, were caught on the wrong side of the squeeze.
A Morgan Stanley spokesman told Reuters the company doesn't have any exposure to Volkswagen, though that doesn't necessarily mean the firm doesn't have a short position against the stock. Goldman declined to comment but sources inside the firm told CNBC Goldman had no significant losses tied to Volkswagen.
Dow component General Motors , which led the blue-chip index lower Monday, was one of the index's biggest gainers Tuesday as the auto maker, along with Cerberus Capital Management, is asking the government for $10 billion to facilitate a GM/Chrysler merger, according to Reuters.
Rival Ford also posted a strong gain.
Boeing was the biggest advancer on the Dow after the aerospace giant reached a tentative labor agreement with its biggest union.
A fun little bit of market trivia: Over the past 80 years, Oct. 28 (today) has, on average, marked the trough in the year for the S&P 500, according to Deutsche Bank.
September and October are typically weak (check) so, "From a seasonality perspective, one could argue that the end of October could be an entry point," Bernd Meyer, head of pan-European equity strategy at Deutsche Bank in London, told Reuters.
American depositary shares of BP soared after the British oil company said its profit more than doubled, helpedbysoaring oil prices.
U.S. oil giant ExxonMobil also jumped afterfalling more than 4 percent Monday.
In morning trading, crude jumped nearly $2, trading between $64 and $65 a barrel.
In tech land, shares of Cisco jumped more than 4 percent after Goldman Sachs added the stock to its recommend list.
SAP shares skidded after the business software maker scrapped its 2008 revenue outlookdue the uncertainty in the global economy.
TUESDAY: Fed begins two-day meeting; consumer confidence; Earnings from U.S. Steel
WEDNESDAY: Weekly mortgage applications; durable goods; weekly crude inventories; Fed announcement on interest rates; Earnings from Aetna, Corning, Kellogg, Kraft, P&G, Qwest, Sony and Visa
THURSDAY: Weekly jobless claims; First look at Q3 GDP; weekly natural-gas inventories; Eanrings from AstraZeneca, Colgate Palmolive, CVS/Caremark, ExxonMobil, Motorola, Royal Dutch Shell and Electronic Arts
FRIDAY: Personal income and spending; consumer sentiment; Fed's Yellen speaks; Earnings from Chevron, Clorox and Nissan
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