Oct. 1--Stocks recovered somewhat Tuesday from their heart-stopping plunge a day earlier, providing at least a modestly upbeat ending to the most volatile third quarter in decades.

But despite Tuesday's gains, market watchers warned that more instability is almost certainly ahead, even if Congress succeeds in enacting a rescue package for the mortgage-battered financial industry.

"People are freaking out on a day-by-day basis," said Mark Corcoran, a senior research analyst in D.A. Davidson's private client group. "They can be either euphoric or depressed."

He said traders were displaying "bipolar" reactions to the ongoing financial crisis, as they speculate about which financial titan might be next to topple and assess the government's as-yet fruitless efforts to settle things down.

The past two days exemplified that dynamic. Major indexes plunged after the House of Representatives unexpectedly shot down the proposed $700 billion bailout bill: The Standard & Poor's 500 index, perhaps the single best gauge of the U.S. stock market, fell 8.8 percent.

But markets rebounded Tuesday, on hopes that lawmakers would be able to salvage a rescue plan later this week. The S&P jumped 58.35 points, or 5.3 percent, to finish the month and the quarter at 1,164.74.

The Dow Jones industrial average, which sank nearly 7 percent, or 777.68 points, Monday -- its biggest point drop ever, though not its biggest percentage drop -- rose 485.21 points Tuesday, for a 4.7 percent gain.

The technology-heavy Nasdaq composite followed its 9.1 percent drop Monday with a gain of nearly 5 percent Tuesday.

Still, all the major indexes fell during the quarter and are down deeply for the year. The Dow is off 4.4 percent for the quarter and 18.2 percent so far this year; the S&P is down 8.9 percent and 20.6 percent; and the Nasdaq is off 9.2 percent and 21.5 percent.

The Seattle Times index, which includes all companies traded on a major exchange and headquartered in Washington, Oregon or Idaho, behaved much like the regional economy: Down, but still better than the rest of the nation.

The Times index closed out the quarter at 1,517.50, for a 2.5 percent gain on the day. However, the index was down 2.9 percent for the quarter and is off 12.5 percent so far this year.

The financial sector has been at the epicenter of the crisis. So far this year, Bear Stearns, Lehman Brothers, AIG, Wachovia, Fannie Mae, Freddie Mac, Merrill Lynch, IndyMac -- and, of course, Seattle's own Washington Mutual -- have gone bust, been taken over by the federal government and/or been bought out by competitors.