Markets mixed following falls across Asia

(CNN) -- U.S. and European stocks have enjoyed mixed fortunes Tuesday, following earlier falls in Asia.

Wall Street ended a volatile session higher Tuesday, as stocks dropped to within a few points of 2003 levels and then bounced back.

The Dow Jones industrial average gained 1.8 percent according to early tallies. The S&P gained 1 percent and the Nasdaq ended little changed.

Europe's major indices -- London, Paris and Frankfurt -- closed between one half and two percent up by the close of trade.

Earlier, Asian and Pacific markets opened lower and extended their losses on Tuesday.

Tokyo's Nikkei 225 index finished the day down 2.3 percent, while Australia's All Ordinaries index closed down 3.5 percent. Seoul's KOSPI index slipped 3.9 percent, and the Hang Seng index in Hong Kong shed 4.5 percent.

Traders remained nervous.

"Nobody knows what to do right now," said Dave Rovelli, managing director of U.S. equity trading at Canaccord Adams. "We know we're in a recession but we don't know how long it's going to last."

"If you're looking longer term, you might want to get in," he said. "But for someone with a shorter-term horizon, there's no reason to get off the sidelines right now."

He said that in the short term, Wall Street was focused on what's going to happen with the Big Three automakers.

"What I'd like to see the rest of this week is a series of small moves, rather than triple-digit days," said Michael Church, portfolio manager at Church Capital. "We need to see some of the volatility get wrung out."

If the market could manage to have a mild week, he said, it would set it up for a year-end rally.

"At this point, so much of the bad news is factored in that some good news might jolt the market," he said.

Congress is debating this week whether to bail out the hard-hit auto industry with $25 billion on top of the $25 billion General Motors, Ford Motor and Chrysler have already received. The money would come from the $700 billion bank bailout plan and a vote is expected as soon as Wednesday.

Separately, Ford is selling a 20 percent stake in Mazda, a statement from Mazda said. The move by Ford is an effort to raise much-needed cash. The automaker lost $3 billion in the third quarter.

The Bush administration opposes taking money from the bailout to help the automakers, and wants to see it come from a Department of Energy program already approved to develop fuel-efficient vehicles. President-elect Barack Obama on Sunday said he thinks aid for the sector is needed, but that it needs to be designed as a long-term strategy, not as a blank check.

Monday's economic news brought further indications that the economy may be in recession.

The New York Empire State index, a regional reading on manufacturing, worsened to negative 25.4 in November from negative 24.6 in October. That was short of forecasts for a reading of negative 26 but still brought the index to the lowest point in its seven-year history.

Another report showed industrial production grew more than expected in October after September's drop-off, the worst in 62 years. Capacity utilization increased a bit short of forecasts.

Reports are due later in the week on producer and consumer prices, housing starts and building permits, leading economic indicators and the minutes from the last Federal Reserve meeting.

CNNMoney.com's Alexandra Twin contributed to this report.

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