Stocks Finish Higher; Dow Nears 14,000
Stocks closed higher on Tuesday as the Dow marched toward the 14,000 level and investors looked ahead to Wednesday's Federal Reserve policy announcement.
The Dow Jones Industrial Average rose 72.49 points, or 0.52 percent, to close at 13,954.42, lifted by big gains in Pfizer and Verizon. Hewlett-Packard lagged. The Dow has not closed above 14,000 since October 17, 2007.
The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, traded near 13.
Among S&P sectors, energy, telecoms and health care advanced, while consumer discretionary lagged.
The energy sector got a lift from an 12.8 percent surge in Valero shares, after the refiner posted a better-than-expected fourth-quarter profit. The company benefited from refining greater amounts of cheap domestic crude oil during the period.
Hess shares, meanwhile, jumped on news hedge fund Elliott Management will nominate five executives to the board as is pitches a plan to break up the company to boost shareholder returns.
(Read More: Gartman Still Likes Stocks vs. Bonds)
Pfizer reported a profit of 47 cents a share net of items, three cents ahead of expectations. Eli Lilly, meanwhile, said its profit fell to 74 cents per share but was still ahead of expectations. Both drugmakers' stocks rose over 3 percent.
However, Ford Motor disappointed the market, with the automaker reporting profit of 31 cents that easily topped estimates but forecasting a wider loss in Europe because of the recession there. Shares fell about 5 percent.
ING Investment Management's Douglas Cote warned that while the U.S consumer is doing okay and housing is doing fantastic, earnings are a challenge.
"Earnings right now is mainly driven by financials, financials have 40 percent growth," Cote told CNBC on Tuesday. "If you look at the nine other sectors, it's flat to negative, so I think we still have some headwinds in earnings."
Turning to economic news, consumer confidence for January fell more than expected as Americans worried about higher taxes, while the S&P/Case-Shiller home price index showed an ongoing housing recovery.
Charles Campbell of MKM Partners told CNBC on Tuesday, that economic conditions in the U.S. and in emerging markets like China are improving. "Treasury yields are moving higher because of good economic data and that's consistent with the market moving higher," he said.
(Read More: Bond Yields Jump May Herald End of 'Risk-Off')
The Federal Reserve's Open Market Committee begins its two-day meeting on Tuesday, before releasing its decision on policy on Wednesday.
"The Federal Reserve statement tomorrow is likely to be the most eagerly anticipated news of the week," wrote Rebecca O'Keeffe, head of investment at Interactive Investor, in a note on Tuesday morning.
"At their last meeting they were clearly considering when to terminate QE3 [the Fed's third round of monetary stimulus], so the market will be looking for any signs of this and, as with most Fed statements, trying to read between the lines."
— By CNBC's Justin Menza