Stocks were off their intraday high, but still traded sharply higher Tuesday as investors were encouraged by a handful of upbeat corporate earnings results and after housing starts rose far more than expected.
The Dow Jones Industrial Average rallied, led by IBM and Coca-Cola , after ending sharply lower in the previous session.
The S&P 500 and the tech-heavy Nasdaq also rose. The CBOE Volatility Index, widely considered the best gauge of fear in the market, slid below 20.
Most key S&P sectors were higher, led by techs and consumer discretionary.
On the earnings front, Wells Fargo posted a higher quarterly profitas the bank dipped into funds previously set aside for bad loans.
However, Goldman Sachs reported earnings that fell far short of Wall Street estimates, sending shares lower. And Bank of America posted a loss after an $8.5 billion settlementwith mortgage bond investors. The banking giant closed below $10 a share on Monday, for the first time since June 2009.
The financials have been under pressure in the last few sessions and is the only sector in the red for the year.
IBM surged after the tech giant posted stronger-than-expected earningsafter-the-bell Monday and raised its full-year guidance, helped by strong sales of its computers and software. At least three brokerages raised their price targets on the firm.
Coca-Cola earnings topped estimates, helped by strong growth in markets outside the U.S. And Johnson & Johnson also said earnings beat estimates.
And Harley-Davidson soared almost 10 percent to lead the S&P 500 index after the motorcycle maker posted a higher-than-expected profit on strong sales and raised its forecast for shipments.
Investors will be focusing on Apple and Yahoo , which are due to report earnings after-the-bell.
Cisco gained after the tech bellwether said it plans to cut its workforce by 11,500 employees as part of its plan to cut annual expenses by $1 billion and revive its business.
News Corp's Rupert and James Murdoch spoke before UK members of parliamenton the ongoing phone hacking scandal. The S&P putting the company's debt on "ratings watch negative." However, shares were still trading higher.
Oil prices ralliedamidstrong economic data as U.S. light, sweet crude gained above $98 a barrel, while London Brent crude traded near $118. Meanwhile, gold eased off its record highs, trading near $1,600 an ounce.
On the economic front, housing starts rose more than expected in June to touch a six-month highand permits for future construction saw a surprise increase, according to the Commerce Department.
Lennar and D.R. Horton climbed more than 4 percent following the news.
Meanwhile, two weeks before their final deadline, President Obama and top lawmakers will face more pressure for a debt deal amid a growing sense that a last-ditch plan taking shape in Congress may be the only way to avoid a devastating U.S. default.
European shares pared some gainsafter German chancellor Angela Merkel said she did not expect one "spectacular result" at a meeting of euro zone leaders to discuss Greece's sovereign debt crisis.
Coming Up This Week:
TUESDAY: Fed's Hoenig speaks; Earnings from Apple and Yahoo
WEDNESDAY: Weekly mortgage apps, existing home sales, oil inventories; Earnings from Altria, United Tech, Abbott Labs, Blackrock, AmEx, Intel, Qualcomm and Ebay
THURSDAY: Weekly jobless claims, Philadelphia Fed survey, money supply; Earnings from AT&T, Morgan Stanley, Nokia, PepsiCo, Freeport McMoran, Travelers, Mircrosoft, AMD and SanDisk
FRIDAY: No major econ. news expected; Earnings from Caterpillar, GE, McDonald's, Schlumberger, Verizon, Honeywell
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