Stocks turned higher despite worries over Apple's future as CEO Steve Jobs takes a medical leave of absence, and disappointing earnings results from Citigroup.
The Dow Jones Industrial Average gained more than 60 points after ending last weekat new highs
Boeing, Caterpillar and Alcoa advanced, while Bank of America fell.
The S&P 500 and the Nasdaq both rose slightly. The CBOE Volatility Index, widely considered the best gauge of fear in the market, rose to nearly 16.
Among key S&P 500 sectors, energy, industrials and materials gained, while financials and telecom fell.
The tech-heavy Nasdaq was dragged down by a 4 percent drop in Apple's shares in the wake of the company's announcement that CEO Steve Jobs was taking a leave to focus on his health, reviving fears over the long-term future of company
Apple, meanwhile, was set to report a 50 percent jump in quarterly sales after the bell, according to analysts, thanks to the popularity of the iPhone and iPad during the recent holidays. Analysts polled by Thomson Reuters expect the group to have earned $5.40 per share on sales of $24.4 billion for its fiscal first quarter.
At the same time, Citigroup posted a profit of 4 cents a share that missed on both the bottom and top lines, with revenue off 6 percent from the previous quarter, sending its shares down more than 4 percent.
S&P Equity Research, meanwhile, maintained its buy rating on Citi, citing the bank's 13 percent drop in non-accrual loans from the third quarter and an 18 percent drop in loan loss provisions.
On the economic front, an index of U.S. home-builder sentimentin January was unchanged at 16, while economists surveyed by Reuters had expected the index to rise to 17. A reading above 50 in the National Association of Home Builders/Wells Fargo Housing Market Index means more builders view sales conditions as good than poor. The index has not been above 50 since April 2006.
Also on Tuesday, Comerica said it was buying regional banking company Sterling Bancshares in a stock deal worth about $1.03 billion, a move that will give the Dallas bank an even bigger stake in the Texas market.
Boeing shares rose after news the airliner would deliver its first 787 Dreamlinerin the third quarter instead of the first quarter after an electrical fire on a test flight in November. Boeing was scheduled to release earnings results on Jan. 26.
Comcast shares rose after news the Federal Communication Commission was expected to approve the cable company's acquisition of NBC Universal from GE (the parent of CNBC).
In other earnings news, TD Ameritrade fell despite reporting quarterly profit that rose 6 percent, in line with expectations, as trading activity picked up. The company's shares have soared 29 percent since the end of September, however. TD Ameritrade earned $145.0 million, or 25 cents a share in the fiscal first quarter, up from $136.2 million, or 23 cents, a year earlier.
Also, Delta Air Linesreported a profit of 19 cents a share that was below Wall Street estimates, sending shares lower.
Investors in technology stocks will also prepare to digest IBM earnings after the bell Tuesday.
Analysts expect the company to report fourth-quarter earnings of 4.08 per share and revenues of $28.3 billion after the bell.
Goldman Sachs will also be in focus after it said it will limit its private placement of shares of social networking site Facebookto investors outside the United States.
Elsewhere in tech news, Intel fell after it was downgraded to "underperform" from "market perform" by First Global, while Yahoo!also fell after it was downgraded to "equal-weight" from "overweight" by Morgan Stanley.
And at least four brokerages raised their price targets for Google : Stifel raised its price target to $700 a share from $650; Oppenheimer raised its target to $705 from $640; Jefferies raised its target to $710 from $700; and ThinkEquity raised its target to $780 from $760.
Meanwhile, McDonald's gained after RBC Capital Market raised its rating on the fast-food chain to "outperform," after news McDonald's will raise prices by 2 to 3 percent in 2011 to combat inflation.
Energy stocks gained even as the price of oil slipped to about $91.46 a barrelTuesday amid a restarting of the Trans-Alaskan pipeline. Exxon Mobil traded above its 52-week high, as other companies, including energy producer EOG Resources and oil and gas driller Helmerick & Payne also gained.
The dollar fell slightly against a basket of currencies, while the euro gained as sovereign funds stepped in to buy. The drop in the dollar contributed to a boost in gold prices, as the precious metal rose above $1,368 an ounce.
European shares rose Tuesday, supported by resource-related stocks, but fading hopes that euro zone finance ministers will reach an agreement to increase the region's rescue fund limited gains.
On the Calendar Next Week:
TUESDAY: Treasury international capital, housing market index, Mattel-Bratz Trial; earnings after-the-bell from Apple, IBM.
WEDNESDAY: Weekly mortgage applications, housing starts, Obama hosts Chinese President Hu; earnings before-the-bell from Goldman Sachs, Wells Fargo; earnings after-the-bell from eBay.
THURSDAY: Weekly jobless claims, existing home sales, leading indicators, Philadelphia Fed survey, oil inventories; earnings before-the-bell from Morgan Stanley, Fifth Third, Huntington Bank, Southwest Airlines, United Health, Union Pacific; earnings after-the-bell from Advanced Micro, Capital One.
FRIDAY: Dodd-Frank rulemaking deadline; earnings before-the-bell from Bank of America, GE, BB&T, Schlumberger and Sun Trust.
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