Also, European banks jumped after a report that the euro zone bailout fund (EFSF) could be allowed to extend credit lines to countries and buy bonds in the secondary markets.
Meanwhile, Wells Fargo gained even after the Federal Reserve issued a $85 million penalty against the companyover allegations a subsidiary steered borrowers toward subprime mortgages with higher interest rates.
Among earnings, Apple surged after the iPod maker beat earnings expectations on Tuesday afternoon and hinted at a new product launch, which most analysts believe to be a new iPhone. At least nine brokerages raised their price targets on the firm.
However, Yahoo tumbled to lead the S&P laggards after the Internet firm reported a decline in revenue and revealed new challenges that hurt its display advertising business. At least five brokerages lowered their price target on the firm.
BlackRock and USBancorp advanced after both firms posted earnings that beat expectations.
Abbott Laboratories slipped, even after the pharmaceutical company reported better-than-expected earningshelped by strong sales growth in emerging markets.
Johnson Controls fell even after the auto parts maker reported a stronger-than-expected profit thanks to a fast recovery from the impact of the Japanese earthquake.
American Express , Intel , Qualcomm , ETrade and Ebay among others are slated to post earnings after-the-bell tonight.
Meanwhile, ETrade jumped to lead the S&P 500 gainers after Citadel, the firm's biggest shareholder, urged the financial services firm to explore a possible sale.
AMR ended flat after the parent of American Airlines said it plans to purchase 460 narrowbody Boeing 737s and Airbus EADS A320s from 2013 through 2022.
Clorox rose after billionaire investor Carl Icahn raised his offer to buy the household products company to $80 a share from $76.50 after the company rejected his previous offer.
News Corp continued to gain after Rupert and James Murdoch testified to a UK parliamentary committee on the phone hacking scandal. Analysts pointed to a relief rally that the hearing did not uncover anything too damaging.
Oil prices advancedfollowing a report that the IEA is unlikely to release more crude stocks into the market. U.S. light, sweet crude gained 54 cents to settle at $98.40, while London Brent crude rose above $118.
On the M&A front, Nalco surged more than 20 percent after Ecolab said it would purchase the water treatment company for $5.4 billion.
Shares of high-profile real-estate website Zillow more than doubled in price, while headphone maker SkullCandy's shares ended unchanged in their initial public offerings, after both debuted well above their expected ranges.
Volume continued to be light with the consolidated tape of the NYSE at 3.3 billion shares, while 796 million shares changed hands on the floor.
On the economic front, existing home sales unexpectedly tumbled to a seven-month lowin June as cancellations of pending contracts soared, according to the National Association of Realtors.
Meanwhile, mortgage applications surged last week, marking the biggest increase in four months amid a flood of refinancing demand as interest rates remained low, according to the Mortgage Bankers Association.
The House passed a bill to raise the debt ceilingon Tuesday evening on condition of caps on current and future spending, but questions remain over whether bill will be approved in the Senate. However, some traders remain skeptical that any deal forged will merely be a temporary solution.
German Chancellor Angela Merkel meets French President Nicholas Sarkozyin Berlin ahead of another meeting of European leaders to find a solution to Greece’s debt crisis. Merkel has already dampened expectations, saying the meeting will not yield a “spectacular” solution that will solve everything.
Coming Up This Week:
WEDNESDAY: Earnings from AmEx, Intel, Qualcomm and Ebay
THURSDAY: Weekly jobless claims, leading indicators, Philadelphia Fed survey, money supply, Bernanke speaks; 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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