Stocks finished near session highs Tuesday, recovering losses from their biggest one-day drop this year, boosted by a batch of upbeat earnings results and some better-than-expected economic reports.
(Read More: After-Hours Buzz: INTC, YHOO, CSX & More)
Interestingly, Tuesday has been the best day of the week for the Dow this year, up 0.41 percent on average. In fact, the blue-chip index closed down on a Tuesday only once this year. The second best day of the week for the index has been Friday, with an average gain of 0.33 percent. Meanwhile, the worst day has been Monday, down 0.36 percent on average.
The S&P 500 rallied 22.21 points, or 1.43 percent, to end at 1,574.57. The Nasdaq jumped 48.14 points, or 1.50 percent, to finish at 3,264.63. The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, slumped below 13.
All key S&P sectors closed in positive territory, boosted by materials and consumer staples.
Disappointing gross domestic product data from China on Monday sparked a sell-off in commodities, which fed through to global equity markets.
"We've been warning on gold for a long time because the meteoric rise upwards was fueled by fear and fearis not a sustainable investment policy," said Karyn Cavanaugh, market strategist with ING U.S. Investment Management.
(Read More: Here's the Scariest Part of the Two-Day Gold Crash)
Meanwhile, the four traditional defensive sectors in the S&P 500—consumer staples, health care, telecoms and utilities—have been the best performers year to date, gaining an average of 18 percent versus the index's 14 percent and the cyclical sectors' 12 percent.
"Reasons for their outperformance include reluctance by latecomers to buy into the higher beta sectors," wrote Sam Stovall, chief equity strategist at S&P Capital IQ. "Also, investors today probably feel like Richard Gere in the movie Officer and a Gentleman, when he wailed: 'I got nowhere else to go!' as a result of the Fed's ultra-low interest rate policy."
Goldman Sachs reported higher quarterly earnings, but shares declined after the financial giant said revenue from client trading fell 10 percent. On Monday, Citigroup posted results that beat forecasts. Rivals Bank of America and Morgan Stanley are expected to report results throughout the week.
W.W. Grainger surged to lead the S&P 500 gainers after the industrial supply company topped earnings expectations and raised its 2013 guidance.
Intel, Yahoo, and CSX are among notable companies slated to post results after closing bell. (Read More: Tech Earnings: What to Expect from Yahoo and Intel)
Earnings for the S&P 500 are expected to show the slowest growth in three years, and analysts have wondered if the earnings season would create an excuse for selling.
"In the end, company earnings are canary in the coalmine," said Cavanaugh. "So far, earnings have been good—but if they falter, economic data continues to be negative and the recession in Europe worsens, we could see a pullback."
"The market is ahead of itself and we seem to be whistling past the graveyard when there are serious economic data points that should be raising yellow flags," continued Cavanaugh, pointing to the latest non-farm payrolls data and retail sales report. Still, she said the central banks' continuing monetary stimulus will likely keep the market afloat.
Among techs, Microsoft gained after Morgan Stanley assumed coverage of the tech giant with an "overweight" rating. And Google advanced after Raymond James lifted its price target on the search engine giant to $875 from $825.
Whirlpool climbed after the home appliances manufacturer increased its quarterly divided by 25 percent to 62.5 cents a share from 50 cents a share.
On the economic front, new home sales jumped to their highest level since 2008, according to the Commerce Department. And industrial production rose in March, according to the Federal Reserve, topping expectations.
(Read More: Is Multi-Family Home Construction Overheating?)
Meanwhile, consumer price index slipped in March for the first time in four months as the cost of gasoline declined, giving room for the Federal Reserve to maintain its easy money policy.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
Coming Up This Week:
WEDNESDAY: Mortgage applications, St. Louis Fed's Bullard speaks, oil inventories, Boston Fed's Rosengren speaks, Beige Book, Treasury Secretary Lew speaks, Carnival Corp. annual mtg, Gap investor mtg; Earnings from Abbott Labs, Bank of America, Bank of NY Mellon, American Express, Ebay, Noble, Sandisk
THURSDAY: Jobless claims, Minneapolis Fed's Kocherlakota speaks, Philadelphia Fed survey, Richmond Fed's Lacker speaks, leading indicators, natural gas inventories Fed Gov. Raskin speaks, Fed balance sheet/money supply, Ebay shareholders mtg, Texas Instruments annual mtg, G20 finance ministers mtg; Earnings from Morgan Stanley, PepsiCo, Philip Morris, United Health, Verizon, Nokia, Peabody Energy, Google, IBM, Microsoft, Capital One, Chipotle, E-Trade Financial
FRIDAY: Fed Gov. Stein speaks, IMF spring mtg; Earnings from GE, McDonald's, Schlumberger, Baker Huges, Honeywell
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