Stocks gained, although they traded down from the highs of the day, following a handful of positive earnings reports and rising commodity prices.
The Dow Jones Industrial Average rose more than 25 points, after gaining about 66 points earlier, following three losing sessions.
Bank of America , Hewlett-Packard and Intel led blue-chips higher, whileVerizon and AT&T lagged.
The S&P 500 and the Nasdaq also trimmed gains, but remained higher. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell to about 17.
Most key S&P sectors advanced, led by energy, health care and materials.Telecom fell.
The dollar traded flat against a basket of currenciesas did the euro. Worries about euro zone debt still lingered among some investors who turned to gold, pushing the price of the precious metal up for a second day to $1,384 an ounce.
There are "lots of eyes on commodities and commodity-driven stocks," Kevin Kruszenski, head of listed trading at KeyBanc Capital Markets in Cleveland.
Specialty chemical makers attracted particular notice, Kruszenski said, citing Ferro, which was up about 7 percent, as well as PolyOne and A. Shulman.
Bank shares mostly rose across the board after Societe Generale upgraded European banks to overweight, saying it believes the sector can achieve more profitability than the market expects. Also, Barclays rallied more than 4 percent after the brokerage noted the bank as one of its top picks.
HSBC climbed after Citigroup upgraded the investment bank to "hold" from "buy."
Other financials including Citigroup and Bank of America gained in addition to a handful of regional banks.
Also, MBIA soared after news the bond insurer won a dismissal of a court complaint challenging MBIA's 2009 restructuring.
Verizon announced a long-awaited partnershipwith Apple to sell the iPhone starting in February. Meanwhile, Jefferies raised its price target on Apple to $450 from $365.
AT&T shares fell as the arrangement was expected to pull customers from the telecom giant to Verizon, according to analysts.
AMD slumped after news that the chipmaker's CEO, Dirk Meyer, resigned in a "mutual agreement"with the board of directors. Current CFO Thomas Seifert will take over Meyer's position as the company conducts a search for a new CEO. Wells Fargo and Raymond James cut their ratings on AMD to "underperform," while S&P Equity raised its price target to $9 a share from $8.
Intel gained after the tech giant said it is paying graphics chip designer Nvidia a $1.5 billion licensing fee, settling a legal dispute over a license to make chipsets. In addition, at least five brokerages upgraded Nvidia's price target.
The price of oil rose 2.08 percent to$91.11 a barrel as a production platform in the Gulf of Mexico was shut down, and officials said there was no word yet on when a Trans Alaska Pipeline System pipeline would be restarted. Last weekend a leak was discovered in the pipeline, which supplies more than half a million barrels per day to the U.S.
Energy stocks were largely higher, including Consol Energy , which reported coal production rose 8.4 percent in the fourth quarter. The energy firm also said its output for natural gas reached a new record for the year.
Alcoa beat analysts' profit expectations in results posted after the market closed Monday, though the stock dropped as it has risen considerably in recent months. Analysts were mixed on the stock. At least two brokerages raised their price targets on the firm and S&P Equity raised its rating on the company to "buy" from "hold." Meanwhile, RBC cut its rating to "underperform" from "sector perform."
In other earnings news, Sears soared after the retailer posted outlook that exceeded expectations as sales rose in several categories, including toys and sporting goods.
But Talbots plummeted after the apparel maker cut its outlookand a reported a sharp decline in same store sales so far this quarter.
Luxury retailer Tiffany reported a huge jump in holiday sales, and used the 11 percent year-over-year gain as reason to boost its full-year outlook for 2011.
Also, Macy's rose slightly after Credit Suisse upgraded the department store chain to "outperform" from "neutral," citing the likelihood that the firm will continue to pay down debt.
Supervalu plunged more than 10 percent after the supermarket chain posted an unexpected loss for the quarter, causing the firm to lower its outlook.
Also in earnings news, Lennar shares soared almost 10 percent after the homebuilder beat its profit target even though sales were lower than expected.
"It’s too early to call for a big recovery in these stocks, but they are going to move before you know it," said Kruszenski at KeyBanc, referring to the homebuilders.
St. Joe sank after the real estate development company said the SEC was conducting an informal inquiry into its impairment of investments in real estate.
Apollo shares jumped more than 10 percent after the for-profit education firm said it managed to shave costs during a troubled quarter, despite a 42 percent drop in new student enrollments.
The automakers, as well as companies that supply the auto industry, were also attracting investor interest as the Detroit auto show generated more excitement than the industry has experienced in some time, Kruszenski said. (Click on the badge to see CNBC's complete coverage of the Detroit Auto Show.)
Treasurys held lossesafter the government auctioned $32 billion of 3-year notes with a yield of 1.027 percent and a bid-to-cover ratio of 3.06. Auctions for 10-year Treasury notes and 30-year bonds were expected on Wednesday and Thursday, respectively. The 10-year note, meanwhile, fell 11/32 points, lifting its yield to 3.35 percent.
On the economic front, wholesale inventories unexpectedly fellby 0.2 percent in November the first drop in 11 months, according to the Commerce Department. The drop reflected a surprising rise in wholesale sales. Economists surveyed by Reuters expected wholesale inventories to rise 1.0 percent from a downwardly revised 1.7 percent gain in October.
Also, National Federal of Independent Business index of small-business optimism slipped in December to 92.6 from 93.2 a month earlier.
European shares closed at 28-month highs, with banking stocks among the best gainers. Concerns over the euro zone debt crisis remained sharply in focus after Portuguese Prime Minister Jose Socrates said the country would not ask for a bailout despite market pressure. Meanwhile, Japan pledged to buy euro zone bondsthis month to support the euro debt crisis.
On Tap This Week:
WEDNESDAY: Weekly mortgage applications, imports-exports price indexes, oil inventories, 10-year Treasury note auction, Federal Reserve’s Beige Book, Treasury Secretary Timothy Geithner speaks; Dallas Fed President speaks.
THURSDAY: Bank of England and European Central Bank announcements, international trade, PPI, jobless claims, 30-year Treasury bond auction; after-the-bell earnings from Intel.
FRIDAY: CPI, retail sales, industrial production, consumer sentiment, business inventories, Richmond Fed president speaks; before-the-bell earnings from JPMorgan.
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