U.S. stocks bounced back after sharp early losses to end Tuesday's session largely stable following Federal Reserve Chair Jerome Powell pledging to keep interest rates low until inflation rises consistently.

The benchmark Dow Jones Industrial Average dropped by nearly 350 points in early trading, but recovered to close with a scant gain of fewer than 16 points at 31,537.35, while the broad-based S&P 500 edged up by 0.1 percent to finish at 3,881.37.

However, the tech-rich Nasdaq Composite Index fell another 0.5 percent to 13,465.2 as a dive in Bitcoin's price spilled onto some shares.

Bitcoin slumped 13.3 percent to $46,951.51, tracking toward its biggest daily loss since March. Tesla's shares in turn fell by 3.3 percent to $690.59.

The drop in Tesla shares hit exchange-traded funds (ETFs) such as the ARK Innovation ETF, down by 4.9 percent, and the ARK Autonomous Technology & Robotics ETF, down by 4.3 percent. Both ETFs feature Tesla as their biggest single holding.

Markets have become jittery about the prospects that the pandemic recovery – fueled by the $1.9-trillion economic stimulus package making its way through Congress – will ignite inflation leading to rising lending rates.

Investors have pushed yields on 10-year Treasury notes higher – a key red flag for rising prices and interest rates.

Art Hogan of National Securities said it was the speed of the increase in yields that surprised markets.

"It feels like there was a tipping point at which that became a concern for growth stocks. And the market reacted to that," he told AFP.

But he said rising yields are a signal the economy is poised to rebound, and "faster economic growth is likely to drive better earnings."

Powell agreed and tamped down inflation fears saying the Fed will keep the benchmark interest rate near zero until the economy reaches maximum employment and "inflation has risen to 2 percent and is on track to moderately exceed 2 percent for some time."

And he stressed that the Fed is prepared to handle whatever comes its way, so "if it does turn out that unwanted inflation pressures arising are persistent, we have the tools to deal with that."

He will have another opportunity to address the issues during his second day of testimony in Congress on Wednesday.

In individual stocks, Boeing fell by 0.4 percent after dozens of its 777 aircraft were grounded following an engine fire on a flight out of Denver which the U.S. regulators said could have been caused by metal fatigue.

Home Depot fell by 3.1 percent after reporting better than expected earnings.

(With input from Reuters, AFP)