Cisco Systems announced it will acquire software maker Sourcefire in a deal worth nearly $2.7 billion in an effort to beef up network security offerings. The network equipment company said the deal would likely close during the second half of the year. Sourcefire shares surged nearly 30 percent following the announcement.
On the economic front, manufacturing activity in the central Atlantic region contracted in July, dropping to -11 from a downward revised 7 in June, according to the Federal Reserve Bank of Richmond. A above zero indicates an expansion.
Treasury prices remained lower after the government auctioned $35 billion in 2-year notes at a high yield of 0.336 percent. The bid-to-cover ratio, an indicator of demand, was 3.08, versus a recent average of 3.54.
In global markets, Chinese stocks boosted shares across Asia following market rumors that China could take stimulus measures to boost its economy.
Chinese shares outperformed after state newspaper Beijing News reported that Chinese Premier Li Keqiang had said the government would not allow the country's gross domestic product growth to fall below 7 percent.
Comments from China's vice-premier, Zhang Gaoli, also bolstered sentiment this week. He reiterated Beijing's commitment to supporting the export and services industries, while steering the economy towards consumer-oriented growth, according to Reuters.
The Shanghai Composite rallied 2 percent on Tuesday, while the Hang Seng Index jumped 2.5 percent. Elsewhere, South Korea'sKospi hit a five-week high.
"Momentum remains positive for equities, which were given a further boost this morning as Premier Li confirmed that the minimum level for growth in China would be 7 percent, raising the potential prospect of stimulus measures to support the Chinese economy and its bottom line growth target," said Rebecca O'Keeffe, head of investment at Interactive Investor.