This was the biggest market drop since early July, caused mostly by fears that the job cuts could pose additional threats to household finances, consumer spending and families’ abilities to make ends meet.

The government will report first-time jobless claims on Thursday, and release its monthly assessment of the labor market on Friday. Economists expect that the report will not be favorable, estimating a loss of 328,000 jobs in July, after a loss of 476,000 jobs in June.

To the extent that the market managed to avoid another iteration of the volatile meltdown that dragged market averages below key technical support levels, the initiative worked. The  S&P finished the session 2 points higher at 895. The Dow Jones Industrial Average which fell more than 200 points Monday in its worst setback in two months, finished the session off 11 points, or two-tenths of a percent, at 8328. 

Financial stocks once again provided a key leadership role in the session, with Bank of America ahead 3% and JPMorgan 2% higher. The gains came after the successful execution of a sale of two-year government Treasuries, and the start of the Federal Reserve policy meeting. It is a meeting that isn’t expected to result in any change in monetary policy, but which could show some changes in the markets, perhaps with some insight into the Fed’s quantitative easing policy. 

Meanwhile, commodity stocks – among the sharpest decliners in Monday’s meltdown – managed to stem their selloff, as energy prices ticked higher, suggesting some recovery in overall economic activity. Shares of Concoco Phillips added 2%. Of course, there proved to be enough cross currents in the market to prevent investors from getting too carried away with the appeal of stocks following Monday’s selloff. Shares of Boeing tumbled 6% Tuesday, after the aircraft manufacturer said it would delay the first flights of its 787 Dreamliner for a fifth time in two years in order to make some changes to its structure.

Stocks have since rebounded by over 30%. Not surprisingly, many shell-shocked investors have been reluctant to deploy new capital during the upswing, which raises the question whether the current rally is just another fleeting bear market bounce or the start of a new multiyear bull run. 

Stocks have been stuck in a long-term, or secular, bear market since March 2000, and it’s too early to tell if the March low marked its end. If so, the decline will have totaled 55% over nine years. It’s not unusual for bear markets to encompass several smaller bull markets, even as the long-term trend remains down. If the current bounce ultimately has staying power it will be worth playing, even if the secular bear market remains in place.

Cyclical bear markets, like the one that began in October 2007, usually include several strong countertrend rallies as well. The sharp bounce off the March low represents the third significant rally attempt during the current cyclical bear market. Compared with those two previous rebounds, however, this upswing looks healthier and more sustainable. Sellers are less motivated, though still more aggressive, than during a typical bull market, while buyers are less risk averse. Stocks were priced for Armageddon in early March, and when it didn’t happen, the path of least resistance was up.

There is however evidence to suggest that the domestic economy has bottomed, even though it will probably keep contracting for several more months. With an unprecedented amount of monetary juice already in the system and fiscal stimulus set to kick in, economic growth could resume as early as the fourth quarter. That’s much better than the market had been expecting, and explains why stocks are rallying so strongly now.

As a general rule, you don’t want to argue with a market that wants to go up, even if the optimism seems a bit excessive or premature. Markets overshoot to the downside and to the upside Still, there remains a disturbingly high probability that after the current rally draws in the last of the reluctant buyers, and climbs the final few rungs of the proverbial wall of worry, that serious disappointment will set in.

Massive government spending worldwide is temporarily filling a portion of the yawning gap in demand left by households and corporations in full retreat. But aside from China, most countries lack the resources to keep the fiscal pedal to the metal for an indefinite period. If unemployment remains stubbornly high for several years, a likely scenario given that banks are still hobbled, and housing won’t power the impending recovery – there could yet be one final and very ugly down leg to this vicious bear market.

In the meantime, enjoy a rally that’s likely to have surprising staying power. And catch up on those financial statements.

During Mr. Geithner’s five year tenure as president of the New York Federal Reserve Bank his relationships with executives of Wall Street’s giant financial institutions became very close, which has resulted in much questioning of his actions which have favored the industry’s interests and desires.

Are Mr. Geithner’s critics right in saying that he has been motivated solely by a wish to help the financial industry, and is doing it at taxpayer expense? Did he miss too many signs, these last few years, that the financial system was falling apart?

You will be most enlightened by Mr. Becker and Ms. Morgenson’s most revealing and well researched background story in Monday’s Times.

Citigroup reported a loss per share of 18 cents, which was narrower than the 34 cents analysts predicted. A year ago, the company suffered a loss of more than $5 billion, or $1.03 a share. Shares rose 12 percent in pre-market trading. Citigroup has been the weakest of the large U.S. banks, posting quarterly losses since the fourth quarter of 2007, but in March, CEO Vikram Pandit triggered a stock market rally after he said that January and February had been profitable for Citigroup.  It was one of the first signals that the banking industry might not be as sick as many believed.

Earlier that month, fears that banks would need to be nationalized sent stocks plunging to 12-year lows. Citigroup’s better-than-expected report on Friday came after surprisingly solid earnings from JPMorgan Chase & Co., Goldman Sachs Group Inc., and Wells Fargo & Co. over the past several days. While recent results from these healthier banks have brought some relief to investors, many have been waiting to see how more troubled banks such as Citigroup have fared. 

On Wall Street, futures spiked early Friday following the earnings announcements, retreated slightly as investors looked deeper into the reports, then moved higher again. Still, the moves were modest as investors were mindful of the weakness that still pervades the financial sector.