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US stocks rise after big fall

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NEW YORK (AP) — Bargain hunters helped push the Dow back above

11,000 briefly Tuesday.

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The Dow Jones industrial average rose 193 points, or 1.8 percent,

to 11,003 in morning trading. On Monday, the Dow had its worst day

since 2008. It plunged 634.76 points as fear coursed through global

markets.

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Investors worried about the first-ever downgrade to the U.S. credit

rating, the slowing U.S. economy, debt problems in Europe and

rising inflation in less-developed countries.

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Hope that the Federal Reserve may announce more help for the

economy in the afternoon also lifted stocks.

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“Prior to the recent turmoil, we had thought the Fed would stand

pat” at its policy meeting on Tuesday, said Paul Dales, senior U.S.

economist with Capital Economics. “But now some action seems

likely.”

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The central bank already has kept its key interest rate close to

zero since 2008. The Fed in June ended a $600 billion program to

buy Treasurys as a way to support the economy. Some Fed officials

oppose another round of so-called quantitative easing because it

could lead to higher inflation.

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When the central bank issues its statement this afternoon, many

economists don’t expect to see another round of Treasury purchases.

But Dales said the Fed could pledge to hold onto the Treasurys and

other assets it has already bought for “an extended period.” Such a

move could soothe investors temporarily because it means the Fed

won’t flood the market with assets to sell. But such a move likely

wouldn’t be a significant boost to the economy.

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The S&P 500 index rose 24, or 2.2 percent, to 1,144. The

Nasdsaq composite index rose 59, or 2.5 percent, to

2,416.

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“I think that stocks were cheap heading into the decline, and they

just became cheaper,” said Brian Jacobsen, chief portfolio

strategist for Wells Fargo Funds Management, which has $228 billion

in assets under management. “As a long-term investor, that’s what I

like to see.”

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While stocks were plummeting Monday afternoon, Jacobsen said he was

buying technology stocks, particularly those with healthy balance

sheets.

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Gold set another record early Tuesday. It rose $21.50 per ounce to

$1,737.70. Gold started the year at $1,421.40.

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Investors piled into Treasurys on Monday, sending the yield on the

10-year note down to 2.34 percent. That matched its lowest level

for the year, reached last week. Treasurys gave back some of those

gains early Tuesday, “as they shake off some of the froth,” RBS

Securities analysts wrote in a report. The 10-year yield rose to

2.38 percent.

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Economists believe there is a greater chance of a recession because

the economy grew much more slowly in the first half of 2011 than

previously thought. The U.S. economy grew at its slowest pace in

the first half of 2011 since the recession ended in June

2009.

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The manufacturing and services industries barely grew in July. The

unemployment rate remains above 9 percent, despite 154,000 jobs

added in the private sector in July.

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Economies across the globe are also struggling.

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Worries are growing that Spain or Italy could become the next

European country to be unable to repay its debt. The European

Central Bank bought billions of euros of Italian and Spanish bonds

Monday in hopes of lowering borrowing costs for the

countries.

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Another concern: high inflation in less-developed countries, which

have been the world’s main economic engine through the recovery.

China’s inflation rose to a 37-month high in July. Hong Kong’s Hang

Seng index fell 5.7 percent on Tuesday.

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The worries about the global economy falling into a second

recession have pulled attention away from stronger corporate

earnings.

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Dish Network Corp.’s second-quarter net income rose 30 percent to

$334.8 million on stronger revenue. Internet company AOL Inc.

reported a smaller net loss for its second quarter, helped in part

by stronger advertising revenue.

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The housing market, though, remains weak. Homebuilder Beazer Homes

USA Inc. said its loss widened last quarter after it closed on

fewer homes.

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Among the 441 companies in the S&P 500 index that have already

reported their second-quarter earnings, profits are up 12 percent

from a year ago.

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