Wall Street kept its perfect streak in 2012 alive, closing solidly higher as investors looked to move beyond Europe's debt problems and gave U.S. banks a vote of confidence.
Stocks closed considerably off their highs for the day, but the light trading activity was good enough to seal another winning day.
The strongest gains came from materials, financials, industrials and energy stocks. Defensive sectors were the least buoyant as risk-on served as the day's theme.
The early-January rally — known as the "January effect" and often a bullish sign for markets — inspired hopes that US markets were beginning to overcome headline risk from the European debt crisis and moving toward a more independent track.
"We've been handcuffed by whatever happens in Europe," said Ryan Detrick, senior analyst at Schaeffer's Investment Research in Cincinnati. "Now we're starting to see a little decoupling from that. When you consider some of the recent economic strength we've had, it's a potentially good sign."
Since 1950, the market has started the year with five consecutive gains on 38 occasions. It ended the year positive 87 percent of the time, according to the Stock Trader's Almanac.
The Dow industrials have been up four out of the six trading sessions so far this year.
Optimistic outlooks from several companies propelled the day's momentum
Alcoa said demand for aluminum, used in cyclical industries such as aerospace and auto manufacturing, would increase in 2012. The company reported a loss excluding one-time items that was in line with expectations, but revenue exceeded Wall Street estimates.
Still, the stock could not hold earlier gains and turned flat to slightly negative as the day progressed.
Also in earnings, integrated circuit developer Cirrus Logic said it expects to show revenue growth of 28 percent for the quarter on strong demand. Stifel Nicolaus raised the company to a buy.
Yoga-wear manufacturer Lululemon boosted its outlook as well due to an increase in inventory, sending its shares sharply higher.
Juniper Networks saw its shares wobble after it lowered guidance due to weakening network router demand from service providers.
Goodyear Tire fell after the company delivered a downbeat presentation at the Deutsche Bank Global Auto Industry Conference.
Tiffany also lowered its outlook, with the luxury retailer citing disappointing demand during the holiday season.
The worst news of the day, though, came for WebMD, which saw its CEO resignand an end to takeover talks, all while the company lowered its outlook.
Small-caps, which do more business domestically and thus are better insulated from geopolitical tumult, helped lead the rally.
The Russell 2000 small-cap benchmark outperformed the large-cap averages, posting a 1.2 percent gain.
All 10 S&P 500 sectors moved positive. In the Dow industrials, banks set the tone, with Bank of America and JPMorgan Chase strongest, while United Technologies and Caterpillar also posted solid gains. General Electric was one of only a few bluechips in negative numbers.
On the tech side, shares of Cognizant Technology Solutions surged a day ahead of its earnings report.
Investors also continued to make bets on a housing recovery, keeping builder stocks on their three-month trajectory higher. The SPDR Homebuilders exchange-traded fund posted solid gains again Tuesday and is up 38 percent since early October.
In economic news, wholesale inventories raised 0.1 percent while wholesale sales climbed 1.6 percent. The rise in inventories was considerably less than the 0.6 percent consensus expectations, but the news had no effect on markets.
In other markets, orange juice futures closed at a record high, gaining 10.6 percent amid concerns over fugicide in Brazil. The March futures contract jumped 10.65 percent to close at $207.75. Silver gained more than 4 percent, while gold rose 1.6 percent to close at $1,631 an ounce.
Stocks rose even though the US dollar was only modestly lower against the world's currencies, bolstering the view that American markets had lost their sensitivity to Europe.
But Bob Janjuah, fixed income strategist at Nomura Securities, said the current rally is likely to run out of steam by Jan. 13, once European worries come back to the forefront.
The first quarter "is going to be extremely bearish for risk, for equities, for the periphery, for the euro, for credit spreads, etc." Janjuah told clients. "The real pain may only be seen in March, when I expect the hard Greece default to happen."
In other company news, Liz Claiborne cut its 2012 outlook and announced that Chief Financial Officer Andrew Warren would be leaving to join Discovery Communications as CFO. The firm lost 9 percent in after-hours trade.
United Continental has struck a tentative contract deal with its flight attendants union, the result of a mediation process that began in September.
And Apple CEO Tim Cook has been awarded $378 million in compensation for 2011, largely in the form of restricted stock that vests over a period of 10 years.