Men gaze at the electronic share price board in Tokyo, Japan, on August 8, 2011. Global stock markets were lower on Monday as investors were worried about the downgrade by Standard & Poor's decision to downgrade its triple A credit rating for the United States. UPI/Keizo Mori | License Photo
NEW YORK, Aug. 9 (UPI) -- U.S. markets found traction Tuesday as bargain hunting accelerated after the Federal Reserve said it would maintain its low interest rate policy.
The buying began early following Monday's huge sell-off, which was prompted by the first-ever U.S. credit downgrade.
By late afternoon Tuesday, the Fed said it would maintain its low interest rate policy through mid-2013, a far more specific announcement than is normal for the central bank, which normally uses the term "for an extended period" to define the duration of its accommodative policy.
By close of trading, the Dow Jones industrial average added 429.92 points, 3.98 percent, to 11,239.77 after losing 5.6 percent or 634 points Monday in the biggest retreat since December 2008 in the midst of the financial crisis.
The Standard & Poor's 500 added 53.07 points, 4.74 percent, to 1,172.53 after dropping 6.7 percent Monday.
The Nasdaq composite index gained 124.83 points, 5.29 percent, to 2,482.52.
European stocks were mixed with Sweden's OMX Stockholm index up 3.26 percent and stocks up 1.63 percent in France.
The FTSE index in Britain closed 1.89 percent higher, adding 95.97 points to 5,164.92.
Stocks rose 1.22 percent on Australia's S&P/ASX 200 index, but equities plummeted in Hong Kong, the Hang Seng index off 5.66 percent, giving up 1,160 points to close at 19,331 after recovering from the day's low of 18, 868 points.
Elsewhere in Asia, the Shanghai composite index was flat, off 0.03 percent, despite data showing China's July inflation had hit a 37-month high of 6.5 percent. State media said inflation had put the government in a tough position as it faces the daunting task of taming prices and ensuring growth amid a faltering global economy.
The Nikkei 225 index in Japan Tuesday lost 1.68 percent after losing 1.7 percent or 153 points Monday, falling below the 9,000-level for the first time since March.
Fears of a double-dip recession in the United States and the debt crisis in Europe earlier gripped markets around the globe after Standard & Poor's downgraded the U.S. debt rating from AAA to AA+.
The downgrade was announced Friday after markets closed. It took until Monday for investors to react -- and the reaction was resoundingly negative.
Monday's losses on the New York markets amounted to about $1 trillion for investors, CNN reported. Bank of America shares fell 20 percent, meaning one-fifth of the largest U.S. bank's on-paper value vanished in one trading session.
Also Monday, S&P downgraded mortgage giants Fannie Mae, Freddie Mac and several U.S. cities.
On Tuesday, the U.S. dollar index dropped 0.39 percent, with the U.S. standard falling to 76.94 yen. The euro traded at $1.4378 from Monday's $1.4179.
South Korea's Kospi fell sharply after opening but recovered somewhat to close down 3.64 percent.
Singapore and Taiwan also closed virtually unchanged. Indonesian markets ended down 2.99 percent.
Both the Sensex and Nifty indexes closed lower in India, after big losses initially.
"You have the onset of fear in the market. There are a lot of things that don't make sense," one analyst told the BBC.
The price of gold -- considered a safe haven at times of uncertainty -- topped $1,750 a troy ounce, settling recently at $1,740.50 on the Comex division of the New York Mercantile Exchange.
Oil dropped about $3 to about $78 a barrel before staging a comeback. By late afternoon, West Texas Intermediate crude oil for September delivery reached $81.87 per barrel.
The shake-up accelerated Monday's near free-fall, but analysts said the rating agency did not cause the downturn, which some are calling the $2 trillion mistake. Over the past 10 trading days, however, about $7.8 trillion has been wiped away in global stock markets as data show an economic recovery that has been floundering for several months.