U.S. stocks jumped on Tuesday as Wall Street started the second half of the year with the Dow rising to within two points of 17,000, as data showed expansion in U.S. manufacturing and better-than-expected sales for major U.S. automakers.
"The message continues to be, we had a really rough first quarter, and the second quarter is going to be better," said Andres Garcia-Amaya, global market strategist at J.P. Morgan Funds.
"These numbers are reassuring us that the first quarter was the outlier, not the other way around," Garcia-Amaya added of Tuesday's economic reports, which had the Institute for Supply Management's manufacturing index coming in at 55.3 in June, nearly unchanged from May's 55.4 reading. New orders rose to a six-month high.
Netflix rose after Goldman Sachs upgraded the video-subscription service to buy from neutral; Symantec fell after Bank of Montreal downgraded the security company to market perform from outperform, and GoPro rallied, extending gains into a fourth session after the sports-video maker's initial public offering.
"We are cautious on the markets because we're getting close to our year-end targets: around 2,000 on the S&P 500, and we're not inclined to raise our target unless this next set of quarterly earnings come in strong," said Marc Doss, regional chief investment officer for Wells Fargo Private Bank.
"The really easy money has been made, so it's harder from here," added Doss.
A separate report had construction spending up 0.1 percent in May.
Chrysler reported a 9 percent jump in U.S. auto sales for June, beating expectations; General Motors topped the low bar set by Wall Street as well as negative publicity over a slew of safety recalls, and Toyota Motor and Nissan Motor reported year-to-year increases.
"Seasonality is in our favor too, oddly enough, July is a good month for us," Art Hogan, chief market strategist at Wunderlich Securities, said of historical trends that have equities rising more often than not in July.
"A lot of people are still fretting over what happened in the first quarter, but all the data that have been coming out, including today's ISM, is consistent with an economy in a meaningful better place, and stock prices are reflecting that reality," said Dan Greenhaus, chief global strategist at BTIG.
The Dow Jones Industrial Average jumped to an all-time high of 16,998.70, and finished at 16,956.07, up 129.47 points, or 0.8 percent. IBM and Visa led blue-chip gains that included 26 of 30 components.
The gained 13.09 points, or 0.7 percent, to close at 1,973.32, after rising to an intraday record of 1,978.58. Health care paced sector gains and utilities proved the sole laggard among its 10 major industry groups.
"It looks like the Dow Jones Industrial Average is on its way to 17,000 and the S&P 500 to its promised land of 2,000," Elliot Spar, market strategist at Stifel, Nicolaus & Company, wrote in afternoon commentary.
Investors should manage risk by raising stops, taking a little off the table and doing some selective hedging, Spar advised.
Climbing to a 14-and-a-half-year high, the Nasdaq rose 50.47 points, or 1.1 percent, to 4,458.65.
The Chicago Board Options Exchange Volatility Index, a measure of investor uncertainty, fell 3.63 percent to 11.15.
For every stock declining, two advanced on the New York Stock Exchange, where 686 million shares traded. Composite volume approached 3.2 billion.
"There are a lot of research reports on how volumes have dried up significantly because of the World Cup," said Garcia-Amaya at J.P. Morgan Funds.
Tuesday's reports also had financial-data firm Markit reporting the U.S. manufacturing sector expanded in June, with its Purchasing Managers Index rising to 57.3, its highest level since May 2010.
China's official purchasing managers' index for June came in at a six-month high of 51, in line with expectations and up from 50.8 in May.
"The global picture seems to be better, especially on the China demand story," said Hogan at Wunderlich Securities.
On Monday, the S&P 500 posted a sixth consecutive quarter of gains, its longest quarterly win streak since 1998.
Read MoreS&P continues quarterly wins
—By CNBC's Kate Gibson
Coming Up This Week:
8:15 a.m.: ADP employment
10:00 a.m.: Factory orders
11:00 a.m.: Fed Chair Janet Yellen on financial stability in central banking lecture at IMF
8:30 a.m.: Weekly jobless claims
8:30 a.m.: Employment report
8:30 a.m.: International trade
10:00 a.m.: ISM nonmanufacturing
Fourth of July holiday
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