Stocks staged a late-day rally in light, choppy trading Tuesday, following the latest Fed meeting minutes, which showed officials debated a third round of asset purchases to stimulate the economy and after investors shrugged off a disappointing consumer confidence report.
The Dow Jones Industrial Average climbed 20.70 points, or 0.18 percent, to finish at 11,559.95, led by Caterpillar and Boeing . The blue-chip index was down almost 110 points at its session lows.
The S&P 500 gained 2.84 points, or 0.23 percent, to end at 1,212.92.
The Nasdaq rose 14 points, or 0.55 percent, to close at 2,576.11.
- Read More: Awful August, Get Set for September
The CBOE Volatility Index, widely considered the best gauge of fear in the market, traded near 32.
Financials and utilities were the two laggards among the key S&P sectors.
Minutes of the most recent Fed's meeting showed that the officials discussed a range of actions, including another round of bond purchases. In the end, Fed officials settled on keeping rates low until at least mid-2013.
The Fed members also added a second day to their September meeting, raising speculation that they may announce some further action following the event.
On the economic front, consumer confidence plunged to in July to its lowest level since Apr. 2009.
“Headline risk is still the biggest risk we have now,” said Brian Battle, vice president of trading at Performance Trust Capital Partners. “All the economic numbers this week should confirm the economy is either slowing or at a standstill…everyone’s still looking ahead to the big jobs number on Friday.”
Boeing gained after the aircraft maker's board approved plans to revamp its best-selling 737 narrowbody with a new engine, citing order commitments for 496 planes from five airlines. Meanwhile, Nomura upgraded the firm to "neutral."
Citigroup cut its August same-store sales estimates for 4 department stores—JCPenney , Kohl’s , Macy’s , and Saks —citing effects from Hurricane Irene.
On the earnings front, Dollar General gained after the retailer
Meanwhile, Barnes & Noble reported a narrower quarterly lossas sales of the bookstore chain's e-reader helped mitigate declining book sales.
Pulte soared almost 10 percent after Ticonderoga upgraded the homebuilder to "buy" from "neutral." Rivals Beazer and Lennar were also trading higher.
On the M&A front, Peabody Energy and ArcelorMittal were reported to have won over Macarthur Coal with a sweetened $5.2 billion takeover offer, after a rival bidder failed to emerge for the Australian coal miner.
Oil prices rose for a sixth straight session, boosted by a bank merger deal in Greece and strong data from the U.S. that allayed fears the world's top oil consumer was sliding back into recession.
Gold prices jumped, boosted by Chicago Fed President Charles Evans who said the Fed may need to be even more aggressive in its easing policies. Evans is a voting member on the Fed Open Market Committee.
Trading volume very light with the consolidated tape of the NYSE at 3.88 billion shares, while 1.08 billion shares changed hands on the floor ahead of a holiday weekend.
Also on the economic front, spring buying helped boost home prices up for a third straight month in June, according to the Standard & Poor's/Case-Shiller home-price index.
Meanwhile Bill Gross, manager of the world’s largest bond fund forPimco, admitted that it was a mistake to bet so heavily against the price of U.S. government debt. Earlier this year, Gross dumped his $244 billion Total Return Fund of U.S. government-related securities that has backfired as the bond market has rallied.
His comments came as the IMF was preparing to slash its growth forecast for the U.S. and say the Federal Reserve and the European Central Bank must be ready to ease policy.
—Follow JeeYeon Park on Twitter: twitter.com/JeeYeonParkCNBC—
Coming Up This Week:
WEDNESDAY: Weekly mortgage apps, Challenger job-cut report, ADP employment report, Chicago PMI, factory orders, oil inventories, USDA's agricultural trade outlook
THURSDAY: Weekly jobless claims, productivity and costs, ISM Mfg index, construction spending, chain store sales, auto sales
FRIDAY: Non-farm payroll
More From CNBC.com: