US stocks climb after sell-off but debt ceiling risks remain high as Yellen warns of recession

• Major indexes rose Tuesday after a big slide in the previous session led by large-cap tech names.
• Treasury Secretary Janet Yellen on Tuesday reiterated her warning to Congress to raise the debt ceiling.
• She said failure to raise the debt ceiling puts the US at risk of default and recession.

Stocks advanced Tuesday after a selloff in the previous session pulled major benchmarks away from recent highs, but risks remain elevated as Washington's tussle over the debt ceiling still looms over the market.

All three of Wall Street's big indexes were modestly higher following after Monday's sell-off left the S&P 500 down by more than 5% from its recent high. The slide also left the Nasdaq Composite off roughly 7% from its recent high, nudging closer to correction territory.

Investors on Tuesday appeared to set aside Treasury Secretary Janet Yellen's reiteration of her recession warning on Tuesday. She said on CNBC early Tuesday that economic activity would decline if Congress fails to raise the debt ceiling by the October 18 deadline.

"It would be catastrophic to not pay the government's bills, for us to be in a position where we lacked the resources to pay the government's bills," Yellen said.

Here's where US indexes stood at 9:30 a.m. on Tuesday:

• S&P 500: 4,318.33, up 0.42%

• Dow Jones Industrial Average: 34,126.02, up 0.36% (123.10 points)

• Nasdaq Composite: 14,316.71, up 0.47%

Failing to raise the ceiling would put the US on the road to defaulting on its debt. JPMorgan CEO Jamie Dimon last week said his firm was preparing for a potential US default, which he warned would be catastrophic.

Stocks remained higher after data early Tuesday showed the US trade deficit in August widened by 4.2% to $73.3 billion as imports increased by 1.4%.

"We've had a number of these situations in the last few weeks where futures were positive only to give up those gains throughout the day, so we'll see if the bulls can keep the market in the green today," said Bespoke Investment Group in a note early Tuesday.

Around the markets, the Federal Reserve has called in the independent Office of Inspector General to determine whether financial trades made by top central bank officials may have broken ethics rules or the law.

Investors poured a net $68.7 million into bitcoin products in the week to October 1, the most since April, according to CoinShares.

Gold fell 0.7% to $1,757.76 per ounce.

Oil prices rose. West Texas Intermediate crude gained 1% to $78.42 per barrel. Brent oil, oil's international benchmark, picked up 1.4% to $82.41.

Bitcoin rose 1.6% to $49,884.81 and topped $50,000 for the first time since early September.