Stocks rebound after plunge

Wall Street rebounded fitfully Wednesday from the previous session's 416-point plunge in the Dow industrials as investors took comfort from comments by Federal Reserve chairman Ben Bernanke.

Bernanke's remarks to Congress that he still expects moderate economic growth gave some investors confidence to look for bargains. A recovery in some overseas markets following a worldwide selloff Tuesday also lent some support to U.S. stocks, but the advance lacked some conviction -- the major indexes fluctuated throughout the day, with the Dow rising as much as 137 points before pulling back and advancing again several times.

The Dow ended the day up 52.39, or 0.43 percent, at 12,268.63. The market's broader indicators also managed gains. The Standard & Poor's 500 index climbed 7.78, or 0.56 percent, to 1,406.82, and the Nasdaq composite index rose 8.29, or 0.34 percent, to 2,416.15.

Lyle Davis, financial consultant and associate vice president of investments at A.G. Edwards & Sons in Cape Girardeau, said his clients are prepared for drops like Tuesday's. So rather than being dismayed, they called to say it was time to buy.

"The stock market is a long-term thing," he said. "Fear and greed provokes small-term investors. It's got to be controlled for long-term success."

Mike DeVaney, professor of economics and finance at Southeast Missouri State University, agreed. "Now if you're 64 years old, looking to retire at 65 and cash in your lifetime inequity, that's another story," he said. "But by the time you reach retirement you should have diversified away from being overly dependent on the stock market."

The Fed chairman allayed some of the fears about a slowdown in the U.S. and Chinese economies that fed Tuesday's drop; remarks earlier in the week from former Fed chairman Alan Greenspan warning that a U.S. recession could take hold later this year contributed to Tuesday's declines.

Bernanke's comments and a gross domestic product reading that mostly met expectations helped bring out some buyers. Nevertheless, investors remained cautious and didn't rush headlong into stocks and discount the possibility of a further shakeout.

"They either are going to buy or sell," said Philip Dame, CFP of Raymond James Financial Services Inc. in Cape Girardeau. "The market just got a little ahead of itself. Nothing major happened in the world."

A recovery in China's Shanghai Composite Index, which had fallen nearly 9 percent Tuesday, also helped boost U.S. stocks, although other Asian markets and European exchanges saw declines of more than 1 percent.

"It's a world market; it's a world economy," Davis said.

Tuesday's decline, which was the largest point drop in the Dow industrials in more than five years, made February an unwelcome month for the 30-stock index. It marked the Dow's worst monthly percentage drop since April 2005 and the worst monthly point decline since December 2002.

Investors also parsed out a series of economic reports Wednesday, hoping to glean a sense of where stocks were headed.

The National Association of Purchasing Management-Chicago index of business conditions in the Midwest showed a weaker-than-expected reading. The February figure fell to 47.9 from 48.8 in January. The report is often viewed as a bellwether for the Institute for Supply Management's index of manufacturing activity for February, which is due today.

Also, a Commerce Department report found new-home sales fell by 16.6 percent in January from the previous month, the largest drop in 13 years.

Business editor Tim Krakowiak contributed to this report.