Stocks rallied Tuesday as the euro gained against the dollar after a number of successful European debt auctions eased investor concerns about the euro-zone's solvency crisis. Techs and industrials led the advance.
The Dow Jones Industrial Average was up more than 150 points, led by Microsoft, Boeing and Caterpillar . Home Depot was among the few blue-chip decliners.
The S&P 500 rose more than 2 percent to trade above its 200-day moving average of 1,108.26, its first time since May. The Nasdaq also jumped more than 2 percent as tech stocks boosted the index. And the CBOE volatility index, widely considered the best gauge of fear in the market, fell near 25.
The euro rose against the dollar as strong demand for government debt from several European countries offset worries about the debt crisis after Moody's downgraded Greece's credit rating to junk status on Monday.
“Most of the downtrend in the euro is done,” said Michael Cohn, chief investment strategist at Global Arena Investment Management. “We’ll probably have one more downdraft for the euro by August to around $1.15, but that’s it.”
Industrials and techs, sectors with some of the biggest exposure to Europe, were among the early leaders. Energy also gained as oil topped $76 a barrel.
Although recent negative reports from the euro-zone have been "sapping the strength" out of the U.S. markets, the news hasn't done much fundamental damageso far, Jeffrey Kleintop, chief market strategist at LPL Financial told CNBC.
“We’ve seen earnings revisions moving up in recent weeks," Kleintop said. "That creates an environment of value and some investors will be able to step in and take advantage of that in the coming weeks."
Kleintop said he favors the small-cap US stocks and advised investors to look into the business spending-oriented sectors over the consumer-oriented ones.
“Materials, industrials and technology look to be the winners on the rebound.”
Meanwhile, some pros argued that the risk of a double-dip recession is growing in the euro-zone.
"There is a more than 50 percent probability," if not of a technical double-dip then of economic stagnation in the area, economist Nouriel Roubini of RGEMonitor.com told CNBC.
In the day's economic news, the Empire State manufacturing index continued to grow in Junealthough employment fell sharply. And in a separate report, U.S. import prices posted their largest drop in nearly a year in May, supporting views that inflation is tame and interest rates are likely to stay low.
And a gauge of homebuilder sentiment dropped to 17 in June from 22 in May as the first-time homebuyers' tax credit expired, the National Association of Home Builders reported.
Chipmakers Intel , Broadcom and Marvell jumped, boosting the Nasdaq.
Banks were mostly higher asHouse and Senate conferees resume work on the financial regulation reform bill, trying to iron out differences between the two versions.
SunTrust shares rose after Rochdale Securities analyst Dick Bove raised the stock
Shares of major credit card companies including Visa , MasterCard and Capital One rose following a report that credit card delinquencies fell again in Mayas more consumers managed to pay their bills despite a sluggish economic recovery.
Best Buy shares skidded after the electronics retailer reported earnings that missed expectations as television prices fell sharply. Shares of rival GameStop also tumbled.
Research In Motion rose following news that the BlackBerry maker is working on touch-screen technology to compete with the iPhone.
And Apple launched a new version of the Mac mini, its lowest priced computer, which will start at $699.
Sprint shares slipped amid news that the telecommunications firm will try to take control of wireless service provider Clearwire
BP remained under intense political pressure amidst a congressional hearing featuring the company's U.S. chief executive. President Obama will give a primetime speech on the oil spill. Reuters reported that BP hired investment banksBlackstone Group, Goldman Sachs, and Credit Suisse as advisers, but did not elaborate on the purpose of the advice.
In London, shares of BP turned negative after Fitch cut the oil major's debt ratingto 'BBB' from 'AA' citing the risk of higher near-term costs, but later came back as investors shrugged off the move, since the oil company is still rated in investment grade territory.
Meanwhile, shares of deepwater drillers such as Transocean and Diamond Offshore continued to surge.
Major U.S. airline shares including Delta Airlines and American Airlines parent AMR rose as the carriers said current quarter unit revenue would rise, helped by recovering business, international traffic and rising fares.
Meanwhile, retailers were mixed. Aeropostale fell following news that a former executive has been charged with taking kickbacks from a supplier. Tiffany fell following news that the upscale jeweler now has an iPhone app for buying engagement rings.
Hershey announced plans to cut 500 to 600 jobs, or about 5 percent of its workforce.
Starbucks announced that it will now offer Wi-Fi in all of its stores using the AT&T network, a moved aimed at hitting back at big chains like McDonald's that are getting into the coffee business.
Shares of the CBOE exchange jumped more than 10 percent on their debut after pricing at $29, the top of the expected range, last night. It is the last major North American exchange to be publicly traded.
In mergers and acquisitions, News Corp offered to buy the 61 percent of satellite TV provider BSkyB that it doesn't already own for $11.5 billion, but its offer has been rejected, with BSkyB saying it significantly undervalues the company.
The CFTC approved so-called box-office futures, allowing traders to bet on how well movies will do at the box office. Trading is expected to begin some time during the third quarter.
And in Europe, Nestle announced it is suing Sara Lee for patent infringement of its Nespresso coffee system, to protect its top-selling product.
FedEx shares rose ahead of its the company's earnings report scheduled for tomorrow before the bell.
WEDNESDAY: Weekly mortgage apps; PPI; housing starts; industrial production; weekly oil inventories; Fed's Plosser speaks; Disney insider trader hearing; China trade hearing; Earnings from FedEx
THURSDAY: CPI; weekly jobless claims; current accounts; leading indicators; Philadelphia Fed survey; BP CEO testifies
FRIDAY: Quadruple witching; S&P indexes rebalanced
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