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Stocks Recover From Early Slide

The broad market rose Tuesday, led by technology shares, investors snapped up beaten-down stocks on the back of Monday's monster rally, and blue chips managed to limit their early losses despite a tumble in consumer confidence in July.

Stocks stumbled after a closely watched gauge of consumer confidence sank below expectations in July, but hopes are growing that the market hit bottom last week. After three weeks of near-constant selling, the market roared higher last Wednesday and again on Monday.

The Dow Jones industrial average shed 31.85 points, or 0.37 percent, to 8,680.03, according to the latest figures available. The index, which racked up its third-biggest point gain ever on Monday, fell almost 2 percent early in the session.

The broad Standard & Poor's 500 Index rose 3.82 points, or 0.42 percent, to 902.78, after raking in a 5.40 percent gain on Monday.

The Nasdaq Composite Index added 8.94 points, or 0.67 percent, to 1,344.19, after falling more than 1.6 percent during the session. The technology-loaded Nasdaq soared 5.79 percent on Monday and scored its biggest percentage gain in nearly 10 months.

"The fundamentals are very positive," said Milton Ezrati, a senior economic strategist at Lord Abbett & Co., which oversees about $45 billion. "As soon as the market can put some of its fear behind it, it should move up smartly. I think stocks are very cheap."

Investors pocketed battered shares like chip gear maker KLA-Tencor Corp. (KLAC) , biotechnology giant Amgen Inc. (AMGN) and energy merchant Dynegy Inc. (DYN), which surged 45 percent.

Investors locked in profits in blue-chip companies in the wake of the Dow's more than 1,000 point run-up since last Wednesday. Alcoa Inc. (AA), the world's largest aluminum producer, dropped $1.22 to $26.13. DuPont Co. (DD), the largest U.S. chemical company, fell $1.90 to $42.05.

The Conference Board said its index of consumer attitudes fell nine points to 97.1 in July from 106.3 in June. That was its biggest fall since October, the lowest level since February, and was far below analysts' expectations for a drop to 101.9.

Hoping to restore investor confidence after a wave of boardroom scandals, U.S. President George W. Bush vowed "hard time" instead of "easy money" for corporate crooks on Tuesday as he signed a law that quadruples penalties for accounting fraud.

"The fears that were running loose a week and a half ago that half the companies are giving fraudulent numbers are evaporating and that has allowed for some buying," said Alfred Kugel, senior investment strategist at Stein Roe Investment Counsel, which oversees about $10 billion.

Energy conglomerate Williams Cos. (WMB) rose 42 cents, or 21 percent, to $2.41 a day after reporting the large quarterly loss it had warned of a week earlier. The market is awaiting news on whether it will be able to make a $450 million bank debt payment due on Thursday. Other energy stocks also gained ground.

Power company shares rallied on relief that Dynegy's largest shareholder, ChevronTexaco (CVX) Corp. , didn't bail out of its investment as some analysts had feared and on Mirant Corp. (MIR)'s reassurances that it is continuing to increase its cash reserves. Dynegy soared 54 cents, or 45 percent, to $1.74. Mirant jumped $1.06, or almost 37 percent, to $3.96. The Standard & Poor's utilities index scrambled up 7.85 percent.

Amgen, the world's largest biotechnology company, climbed $1.47 to $45.49 as biotechnology shares popped higher after being beaten severely in recent sessions. Chiron Inc. (CHIR) gained $1.69 to $33.74, while MedImmune Inc. (MEDI) rallied $2.15 to $29.59. The Nasdaq Biotechnology index was up 4.04 percent.

KLA Tencor rose $1.43 to $40.34 ahead of its quarterly earnings due after the closing bell. Graphics chip maker Nvidia Corp. (NVDA) racked up a $1.10 gain to $16.22, also ahead of the release of its earnings on Tuesday. The Philadelphia Stock Exchange Semiconductor index climbed 2.86 percent.

But Corning Inc. (GLW) took a hit after Moody's Investors Service and Standard & Poor's downgraded the credit ratings of the leading fiber-optic cable maker to junk status on concern that a recovery in telecommunications equipment spending will likely not begin before 2003. Corning slumped 68 cents, or 22 percent, to $2.47.

Software maker FreeMarkets Inc. (FMKT) tumbled $2.92, or 31 percent, to $6.47. The company posted a narrower loss in its second quarter but lowered its revenue outlook for the rest of the year citing the difficult technology spending environment.

Winners edged out losers by a ratio of 6 to 5 on the New York Stock Exchange and Nasdaq. More than 1.82 billion shares changed hands on the Big Board and more than 1.69 billion on Nasdaq. Trading was active but lighter than in past sessions that saw record volumes.

The Russell 2000 index fell 3.40 to 397.41. 

Overseas, Japan's Nikkei stock average rose 3.5 percent. In Europe, Germany's DAX index advanced 0.5 percent, Britain's FTSE 100 slipped 0.5 percent, and France's CAC-40 lost 0.5 percent.

Reuters and the Associated Press contributed to this report.