The ECB's massive 16-day tender supported the idea that the world's central banks are working to revive demand in struggling areas of the credit market. The Bank of England also said it will offer additional reserves to lenders Tuesday, after the U.S. Federal Reserve on Monday auctioned off $20 billion in 28-day credit.

Few are calling the end of the credit crunch just yet, though, and the market's seesaw movements on Tuesday reflected its uncertainty. Alongside U.S. government data showing that new home construction dropped in November to its lowest rate in more than 16 years, the central banks' actions had a hard time galvanizing a market that remains anxious that the economy has further to fall.

"It's very disconcerting that we're getting central bank interventions for a problem that many were hoping would be a self-contained one," said Joseph V. Battipaglia, chief investment officer at Ryan Beck & Co.

Meanwhile, cautious forward-looking comments by Goldman Sachs Group Inc. and Best Buy Co. dampened the market's enthusiasm over the companies' better-than-expected quarterly earnings.

"The credit issues, the liquidity issues, are still there," said Ryan Detrick, strategist at Schaeffer's Investment Research. "There's a dark cloud over the market."

According to preliminary calculations, the Dow Jones industrial average rose 65.27, or 0.50 percent, to 13,323.47, after gaining as many as 112 points, tumbling by 75 points, and then rebounding.

The blue chip index had lost 4 percent over the past week since the Fed's decision last Tuesday to lower interest rates by a quarter point, which was less than many investors hoped.

Broader stock indicators also bounced back from a midday slump. The Standard & Poor's 500 index rose 9.07, or 0.63 percent, to 1,454.97, and the Nasdaq composite index rose 21.57, or 0.84 percent, to 2,596.03.

Each of the three major stock indexes on Monday lost at least 1 percent due to concerns that prices could keep rising despite a weakening economy — a phenomenon called stagflation. Stocks have also been volatile due to the upcoming "quadruple witching" on Friday, when contracts expire for stock index futures, stock index options, stock options and single stock futures.

Government bonds rose Tuesday. The yield on the 10-year Treasury note, which moves opposite its price, slipped to 4.12 percent from 4.15 percent late Monday.

Goldman fell $7.12, or 3.4 percent, to $201.51 after releasing its earnings report, which showed a 2 percent profit gain but uneven results across the investment bank's various units.

Best Buy fell 48 cents to $51.62 after the electronics retailer posted a 52-percent profit gain but offered an outlook that came in below analysts' expectations.

The Commerce Department said housing starts and building permits fell last month compared with October, bolstering investors' belief that the economy will continue to feel the housing market's drag in the new year. Housing starts fell 3.7 percent to the lowest level in more than 16 years, while building permits fell 1.5 percent to the lowest in more than 14 years.

The Fed revealed a plan Tuesday to give people taking out mortgages new protections against questionable lending practices — particularly to subprime borrowers, whose inability to keep up with their loan payments has led to this year's spike in foreclosures and credit crunch.

Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.49 billion shares compared with 1.44 billion traded Monday.

The Russell 2000 index of smaller companies rose 15.00, or 2.03 percent, to 754.06.

The dollar rose against other major currencies and gold prices also advanced.

Light, sweet crude fell 14 cents to $90.49 a barrel on the New York Mercantile Exchange.