Bank stocks led Tuesday's rally, with Bank of America among the leading gainers as its chief executive told investors the bank will cut costs to boost profits, as it continues to address mortgage losses. CEO Brian Moynihan also reiterated the bank's plans to increase its dividend in the second half of the year.
The news gave short-term traders as well as long-term investors a reason to buy the bank's stock, which has been trading at depressed levels, said Scott Redler, chief strategic officer at T3Live.com, who believes the stock could reach as high as $17 or $18 a share this year.
"People want to buy Bank of America," Redler said. "They see it as a play for an improving economy."
Redler also noted that if the S&P 500 is able to get beyond 1,330 or 1,332 in today's move, it "could take us back to the highs of two-and-a-half weeks ago, or obviously higher."
Transportation companies led industrials higher, including Southwest Airlines , Ryder , and Expeditor's International , as an easing in oil prices brought relief to investors. The Dow Jones Transportation Index rose nearly 2 percent.
McDonald's fell despite reporting a 3.9 percent gain in global growthin restaurants open at least 13 months on Tuesday.
And Urban Outfitters sank after the retailer delivered unexpectedly weak profits. Citigroup cut Urban Outfitters' price target to $34 a share from $38, while Wall Street Strategies cut the retailer's rating to "sell" from "hold."
Also, a federal judge extended a temporary order preventing courts in Ecuador from collecting an $18 billion judgment against Chevron .
Boeing rose after news the airline manufacturer signed deals valued at about $10 billion with two Chinese airlines for 2,000 planes over the next 5 years.
Shares of Sprint Nextel spiked amid rumors that Deutsche Telekom plans to sell its T-Mobile USA unit in exchange for a major stake in Spring, according to Bloomberg, citing sources. CNBC reported the two sides were far apart in price a few weeks ago and that nothing seems imminent.
Among tech stocks, Ciena fell for a second day after a disappointing earnings release on Monday, and despite two firms raising their prices targets for the communications equipment company.
Bed, Bath & Beyond slumped after Oppenheimer downgraded the home goods retailer to "perform" from "outperform," and cut its price target to $51 a share from $54, citing the effects of rising cotton prices on profits.
In economic news, the monthly "optimism index" from the National Federation of Independent Business reported its fourth monthly gain on Tuesday. The index, at 94.5, remains below 100, which was the average level for 30 years before the recent recession.
The Treasury will auction $32 billion in three-year notes on Wednesday at about 1 p.m.
Treasury Secretary Timothy Geithner will visit Germany before a European Union summit on rescuing cash-strapped European countries.
On the Calendar:
TUESDAY: 3-year Treasury note auction, BofA investor conference, Nvidia analyst meeting.
WEDNESDAY: Mortgage applications, wholesale trade, oil inventories, 10-year Treasury note auction, BofA/ML consumer conf., Citi 2011 financial services conference, anniversary of S&P 500 closing low (2009); earnings before-the-bell from American Eagle Outfitters and after-the-bell from H&R Block.
THURSDAY: BoE announcement, international trade, jobless claims, quarterly services survey, 30-year Treasury bond auction, Treasury budget, money supply, Nasdaq peak anniversary; Earnings before-the-bell from Smithfield Foods and after-the-bell from National Semiconductor.
FRIDAY: Retail sales, consumer sentiment, business inventories, S&P index rebalancing info due, Apple's iPad 2 ships; earnings before-the-bell from Ann Taylor.
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