Stocks on Wall Street experienced a bumpy ride on Tuesday, before closing slightly lower.

Shares had slipped back in morning trading after new figures had shown that consumer confidence in the US was falling.

Tuesday markets

US Dow Jones down 31.85 at 8,680.03 US Nasdaq up 8.94 at 1,344.19 UK's FTSE down 21.8 at 4,180.9 Germany's Dax up 19.16 at 3,878.94 France's Cac down 15.98 at 3,379.85 Japan's Nikkei up 337.05 at 10,003.72

At one point the Dow Jones index was down by more than 170 points, but it recovered to close down 31.85 points at 8,680.03.

The tech-heavy Nasdaq also recovered and held on to positive territory, closing 8.94 points higher at 1,344.19.

European markets had see-sawed erratically in morning trade before settling into the red.

The FTSE 100 finally closed down 0.5% at 4,180.9, having swung as much as 1.6% in either direction in the course of the day.

The Cac in Paris also ended in negative territory, down 0.47%, but Germany's Dax benefited from the rebound on Wall Street and closed up 0.5%.

Hanging on

The volatility came after heavy gains of between 4-8% in Europe and the US during the previous day's trading.

This is not panic, just a healthy rest

Ralph Acampora, Prudential Securities

Investors are trying to assess whether the recent four-day rally signals the start of a new upward trend or whether the gains will prove to be short-lived.

But analysts were impressed that most of Monday's gains were maintained

"This pullback that we're getting is great. This is not panic, just a healthy rest," said Ralph Acampora, director of technical research at Prudential Securities.

"At least on a short-term basis we're starting to feel better."

Loss of confidence

In recent weeks, investors had been losing confidence in the reliability of corporate accounts, leading them to desert shares for potentially safer options.

Market gains, Monday 29 July

US Dow Jones index +5.4% US Nasdaq index +5.8% US S&P index +5.4% Germany's Dax +7.85% France's Cac +7% UK's FTSE +4.6%

But the US government has promised to clamp down on fraud, and on Tuesday President Bush signed new legislation designed to stamp down on accounting abuses in the wake of the recent corporate scandals.

There is also a growing feeling that the widespread sell-off has left shares has left them relatively cheap.

Institutional investors in particular are keen to make sure they do not miss the bottom of the market, and have been out in force to snap up bargains.

"As soon as the market can put some of its fear behind it, it should move up smartly," said Milton Ezrati, a senior economic strategist at Lord Abbett & Co.

"I think stocks are very cheap."