U.S. stocks turned higher Tuesday afternoon, with the Nasdaq making its largest rebound in five years, as investors weighed upbeat earnings from Dow components Coca-Cola and Johnson & Johnson against disappointing reads on builder sentiment and New York-area manufacturing, while tracking events in Ukraine.
Reports of pro-Russian separatists briefly taking control of an airfield in eastern Ukraine weighed on investor sentiment early on, but the mood shifted Tuesday afternoon, when investors were heartened that "the worst case scenario hasn't come to fruition," said Art Hogan, chief market strategist at Wunderlich Securities.
"They are both talking themselves into a conflict, but things didn't get worse and that's exactly where we are now," Hogan said.
The market's latest reversal happened to come in roughly the same time frame as a story Tuesday afternoon that Japan planned to downgrade its economic assessment. "It's hard to pinpoint on any one headline," said Dan Greenhaus, chief global strategist at BTIG. But the idea that the "Bank of Japan could do a little more support took the yen down and coincided with a turn in equities," he added.
That said, "people are grasping at a lot of things right now; people will grasp at anything for signs of life. At some point some of these hard-hit names and sectors are going to get attractive, if valuation is your concern, but it's on a case-by-case, or sector-by-sector basis," Greenhaus said.
"The market is very oversold here, it should rally," said Bruce Bittles, chief investment strategist at RW Baird.
"The market is trading more on technical levels as opposed to fundamentals, but ultimately the fundamentals will trump everything, as that's the environment you can project for corporate profits, and corporate profits are going to matter more this year than multiple expansion," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
After rising 99 points and falling 110, the Dow Jones Industrial Average ended at 16,262.56, up 89.32 points, or 0.6 percent. Coca-Cola and Johnson & Johnson paced blue-chip gains that extended to 23 of 30 components.
The rose 12.37 points, or 0.7 percent, to 1,842.98, with energy leading gains that included all 10 of its major industry groups.
After falling as much as 1.9 percent during the session, a level that brought it down more than 9 percent from its March high of 4,371.71, the Nasdaq Composite added 11.47 points, or 0.3 percent, to 4,034.16. The comeback marked the technology-laden index's biggest since April 1, 2009.
For every two shares falling, more than three rose on the New York Stock Exchange, where 789 million shares traded; composite volume cleared 3.7 billion.
Wall Street started off the session higher, with the Dow climbing nearly 100 points, after Coca-Cola reported first-quarter revenue that beat expectations and Johnson & Johnson hiked its yearly outlook.
But equities fell, pushing the Nasdaq Composite down 9 percent from its March highs, after The Federal Reserve Bank of New York's gauge of manufacturing fell in March and the National Association of Home Builders/Wells Fargo Housing Market Index climbed to 47 in April, coming in below estimates.
The Nasdaq's fall "is not overly positive as as indicator for the rest of the market, the S&P for example. The longer MasterCard, Priceline, Google, and the biotechnology names continue to plumb new lows, the more likely it is the rest of the market will follow them down," said Bruce McCain, chief investment strategist at Key Private Bank.
"Valuations got a little bit elevated given the anemic growth we've seen this year. Corrections are one way to moderate that. We look for a correction, not the start of a bear market," McCain, added.
The tensions in Ukraine "is one more source of the tug of war between those who think the market should go up and those who can't find a reason to send it higher. Russia is a simmering pot that has the potential to boil over and at least dampen investor complacency," said McCain.
Gold prices were hammered Tuesday, with futures for June delivery down 2.1 percent at $1,300.30 an ounce, after the World Gold Council said consumer demand for the metal could be limited this year.
"Gold is getting obliterated today. The council is forecasting China is not going to be increasing its demand for gold this year, so the buying of jewelry and such is not growing; otherwise I would interpret today's data as being gold friendly, as inflation was higher than consensus," said Luschini of data that had the cost of living in the U.S. rising more than estimated in March as the cost of food and rents climbed.
The dollar edged higher against other global currencies and the 10-year Treasury yield fell 3 basis points to 2.615 percent. Crude-oil futures for May delivery fell 30 cents to $103.75 a barrel.
On Monday, stocks rallied after data had U.S. retail sales rising the most since 2012.
—By CNBC's Kate Gibson
Coming Up This Week:
4:00 p.m.: Boston Fed President Eric Rosengren
8:00 p.m.: Minneapolis Fed President Narayana Kocherlakota
Earnings: Google, Bank of America, IBM, American Express, PNC Financial, Capital One, Credit Suisse, US Bancorp, Huntington Bancshares, SLM, SanDisk, Steel Dynamics, Abbott Labs, St. Jude Medical, Noble, Burberry, Kansas City Southern
7:00 a.m.: Mortgage applications
8:30 a.m.: Housing starts
8:30 a.m.: Fed Gov. Jerome Stein
9:15 am Industrial production
11:30 a.m.: Atlanta Fed's Lockhart
12:25 p.m.: Fed Chair Janet Yellen at Economic Club of NY, Q&A
1:25 p.m.: Dallas Fed President Richard Fisher
2:00 p.m.: Beige book
Earnings: General Electric, BlackRock, Goldman Sachs, Morgan Stanley, Blackstone, DuPont, Union Pacific, Pepsico, Chipotle, Baker Hughes, Sherwin-Williams, Fifth Third, AutoNation, Sonoco Products, Snap-on Mattel, Cypress Semiconductor, Baxter, Taiwan Semiconductor, Rockwell Collins
8:30 a.m.: Jobless claims
10:00 a.m.: Philadelphia Fed survey
Markets closed for Good Friday
10:00 a.m.: Leading indicators