Investors came off the sidelines to buy stocks that have languished in five turbulent sessions. The Dow made back about 26 percent of the ground it lost over the past week, and scored its highest one-day point gain since July 24.

Despite the rebound, questions remained about whether the correction that has swept around the globe has truly run its course. U.S. investors were still contending with fundamental economic issues, including a weaker than expected reading on fourth-quarter productivity and the dollar's vulnerability against the yen.

The advance today treated Wall Street traders to what had become a rare sight — the color green splashed across their computer screens that show stock prices, instead of last week's red. But, after being knocked about by erratic market shifts in recent sessions, there was still a sense this might not be the recovery everyone is waiting for.

"I don't think we should get too used to seeing all this green," said Jay Suskind, head trader at Ryan Beck & Co. "This market feels to me like it doesn't have legs, there just doesn't seem to be that euphoria out there. There is still trepidation."

The Dow rose 157.18, or 1.30 percent, to 12,207.59, after dropping 581 points over the past week. The Standard & Poor's 500 index was up 21.29, or 1.55 percent, at 1,395.41 in its biggest advance since July.

The Nasdaq composite index rose 44.46, or 1.90 percent, to 2,385.14. The tech-dominated index, which includes many companies considered young and risky compared to S&P 500 stocks, was particularly hard-hit in last week's slide. It was the Nasdaq's best one-day advance since Oct. 4.

The Russell 2000 index of smaller companies was up 18.82, or 2.48 percent, at 778.88.

Advancing issues outnumbered decliners by about 5 to 3 on the New York Stock Exchange, where volume came to 1.83 billion shares.

Overseas, stock indexes posted healthy gains after plunging for the past week. According to the Dow Jones Wilshire Global Total Market Index, the world's markets had lost $3.1 trillion since Feb. 26 — with $1 trillion coming from the U.S. alone.

Japan's Nikkei stock average closed up 1.22 percent Tuesday. At the close, Britain's FTSE 100 regained 1.32 percent, Germany's DAX index rose 0.92 percent, and France's CAC-40 was up 0.97 percent.

The gain in equities and lingering inflation worries sent prices falling in the bond market. The yield on the benchmark 10-year Treasury note rose to 4.53 percent from 4.51 percent on Monday.

The dollar was up versus the yen, but mixed against other major currencies, recovering after several days of steep declines. The rebound in global stock prices created renewed interest in yen-funded carry trades. Gold prices also rose.

Oil prices rose as strategists pointed to robust demand for gasoline and falling petroleum inventories. The price of a barrel of light sweet crude rose 60 cents to $60.67 on the New York Mercantile Exchange.

Tuesday's rebound was the first bit of light in a week for a volatile market. It also comes despite data that continued to show weakness in housing and production, and triggered some talk of inflation.

The Labor Department reported that worker productivity rose at a modest annual rate of 1.6 percent in the fourth quarter while wages and benefits soared. The Commerce Department said factory orders fell 5.6 percent in January after a 2.6 percent increase the previous month.

Scott Fullman, director of investment strategy for Israel A. Englander & Co., said the market wasn't shrugging off the pair of government reports. Instead, he believes investors have just had enough — and that the sell-off was overdone.

"I'm not convinced the bull market is over, I just think the bull is tired and needs to take a break," he said. "There are opportunities out there so long as we don't see a major slip in the economy. We have to concentrate on that, how earnings are going to go, and obviously what the Fed does."

And there was no new indications on how policymakers feel about the future of interest rates, or the impact of inflationary pressures. Bernanke, during a speech in Hawaii, did not talk about rates in a prepared speech.

Instead, he became the latest public official to chime in about defaults and delinquencies in the mortgage industry. He urged Congress to bolster regulation of Fannie Mae and Freddie Mac, and suggested limiting their massive holdings to guard against any danger their debt poses to the overall economy.

Fannie Mae shares rose $1.71, or 3.2 percent, to $54.83, while Freddie Mac rose 75 cents to $62.11.

Financial stocks as a whole trended higher after being battered due to the market plunge. Treasury Secretary Henry Paulson said credit issues linked to the U.S. housing slump will be limited, easing concern about the potential of rising defaults in subprime loans.

Mortgage lender New Century Financial Corp., which shed almost 70 percent of its market value on Monday, rose 46 cents, or 10.1 percent, to $5.02. Fremont General Corp. added 89 cents, or 15.1 percent, to $6.78.