US stocks see rebound after Monday's fear-driven sell-off

The Dow Jones Industrial Average added more than 2 percent in early trade before falling back slightly, while the Nasdaq's early gain topped 2.6 percent.

At 1415 GMT the Dow was up 183.99 points (1.70 percent) to 10,993.84.

The broader S&P 500 rose 24.43 (2.18 percent) to 1,143.89, while the tech-heavy Nasdaq Composite picked up 60.57 points (2.57 percent) to 2,418.26.

The slight rebound came after Monday's rout, the biggest plunge since the financial crisis of 2008, driven by the news that Standard & Poor's had downgraded the U.S. credit rating as well as worries about a new recession.

The Dow lost 5.6 percent, the S&P 500 6.7 percent, and the Nasdaq 6.9 percent.

Traders were looking ahead for inspiration from the Federal Reserve's policy-setting committee, which was meeting Tuesday morning to discuss what can be done to boost the sagging economy.

“This positive price action comes ahead of the Federal Open Market Committee's latest decision on monetary policy,” said Sarah Wasserman of Schaeffer's Investment Research.

“While the Fed's been noncommittal about additional monetary easing, Friday's downgrade has spurred hopes that additional assistance from the government could, perhaps, be on the horizon.”

Bank of America jumped 6.1 percent, rebounding from its 20.3 percent plunge on Monday spurred by AIG's US$10.5 billion lawsuit against the bank over losses incurred on mortgage-backed securities sold by a Bank of America unit.

Citigroup, another big Monday loser, was up 10.9 percent.

Bond prices were slightly lower. The yield on the 10-year Treasury rose to 2.38 percent from 2.34 percent late Monday, while that on the 30-year Treaury rose to 3.69 percent from 3.66 percent. Bond prices and yields move in opposite directions.

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