Federal Reserve Chairman Ben Bernanke told Congress Wednesday regulators are closely watching U.S. markets following the huge drop in stock prices Tuesday. But U.S. stock markets rebounded early Wednesday on Bernanke's optimistic assessment of America's economic outlook for 2007. VOA's Barry Wood reports.

The global sell-off continued in Asia -- with the exception of mainland China -- and Europe before Wall Street rebounded in early trading.

Ben Bernanke testifies on Capitol Hill in Washington, before the House Budget Committee hearing on long-term fiscal challenges and the economy, 28 Feb 2007

He told legislators U.S. economic activity remains solid and saw no single factor that had contributed to Tuesday's decline.

The New York Stock Exchange dropped more than 416 points Tuesday in the largest sell-off in five years.

Bernanke noted there is continuing weakness in the U.S. housing sector, but said even there improvement is likely.

He said, "We believe that if the housing sector begins to stabilize and if some of the inventory corrections that are still going on in manufacturing are completed that there is a reasonable chance that we'll see some strengthening of the economy in the middle of the year."

Bernanke spoke after the U.S. Commerce Department released a sharp downward revision of U.S. economic growth to 2.2 percent in the fourth quarter of 2006. Its earlier growth figure was 3.5 percent. Most forecasters anticipate U.S. economy to grow at two and a half to three percent this year.

Some financial analysts had said the rising stock markets around the globe were due for what they call a "correction." They attributed Tuesday's precipitous sell-off to a number of factors, including a sharp drop on the Shanghai stock exchange and an earlier statement by Bernanke's predecessor, Alan Greenspan, that the U.S. economy is heading for a possible recession.