New York, Aug 25 : US stocks opened sharply higher on Tuesday as investors sought out bargains after the Dow Jones Industrial Average's worst three-session drop.

Shortly after the opening bell, the Dow Jones Industrial Average surged 331.04 points (2.09 percent), to 16,202.39. The S&P 500 gained 36.83 points(1.95 percent), to 1,930.04. The Nasdaq Composite Index spiked 147.90 points (3.27 percent), to 4,674.14.

The People's Bank of China (PBOC), China's central bank, announced on Tuesday a cut in the reserve requirement ratio (RRR) and lower key interest rates.

Wall Street was cheered by the move, which was described in a PBOC statement as "promoting restructuring" to "stabilise the real economy".

Investors will also keep an eye on new home sales and US consumer confidence index due later in the day.

US stocks continued to plunge on Monday, with the Dow Jones Industrial Average diving more than 500 points, as a rout in global markets continued to intensify.

All three major Wall Street indexes fell into correction mode over the past two sessions.

The CBOE Volatility Index, often referred to as Wall Street's fear gauge, soared 45.34 percent to end at 40.74 Monday.