U.S. stocks rose on Tuesday, lifting the Dow and S&P 500 to their loftiest ever, as a $66 billion deal by Actavis for Allergan helped drive gains in the healthcare sector and a gauge of sentiment among U.S. home builders increased more than expected.
"We started off on a good note with the reading from the German investor confidence report, which was the biggest increase in 11 months, and European auto sales were up for a 14th consecutive month. That enthusiasm spilled over into U.S. equity markets, where investors have been concerned about Europe," said Mark Luschini, chief investment strategist at Janney Montgomery Scott.
"In the U.S., we had a nice increase in home-builder confidence, and expectations for future sales were also up," Luschini said.
The November survey from Germany's ZEW Institute came in better than expected, rebounding from a sharp decline the month before, while the European Automobile Manufacturers Association reported registrations of new passenger cars in the European Union in October increased 6.5 percent from the year-ago period.
In Japan, Prime Minster Shinzo Abe said he was delaying next year's sales tax increase and calling for an early poll to get a mandate for his reflationary economic policies that how so far failed to yield solid results.
"We had relatively good news around the world here, we've got Japan pushing back that sales tax for 18 months and holding a snap election, so that means more, longer stimulus in Japan. And in Europe, the business confidence index, the ZEW, was better than expected," said Art Hogan, chief market strategist at Wunderlich Securities.
Stock futures eased gains, turning lower to little changed, after the U.S. government reported a 0.2 percent gain in wholesale costs in October, as investors weighed the ramifications on the Fed's timetable for raising benchmark rates.
"That worry is misplaced. Inflation on the producer-price level has not passed onto the consumer just yet. Wage pressure is most important, so until we see that, this does not move the Fed's schedule," said Hogan.
"We repeat our March 2015 rate-hike expectations," emailed Peter Boockvar, chief market analyst at the Lindsey Group.
Boockvar is "on the front end of the curve, and I would say the folks who fall into the Fed-hater camp are going to look at everything as meaning higher rates sooner. Unless something drastically changes, we're going to see something in the middle to back half of 2015 at the earliest," countered Hogan.
Major U.S. Indexes
After hitting an intraday record, the Dow Jones Industrial Average added 40.07 points, or 0.2 percent, to end at 17,687.82, a record finish.
Home Depot fell are the Dow component and home-improvement chain reported adjusted earnings that missed estimates by a penny a share.
A day after closing at a record, the set another for the intraday, and finished up 10.48 points, or 0.5 percent, to 2,051.80, with healthcare leading gains that extended to all but one of 10 major sectors, with telecommunications the laggard.
The Nasdaq advanced 31.44 points, or 0.7 percent, to 4,702.44.
For every two shares sliding, more than three rose on the New York Stock Exchange, where nearly 731 million shares traded. Composite volume cleared 3.4 billion.
The U.S. dollar fell against the currencies of major U.S. trading partners; the yield on the 10-year Treasury note fell 2 basis points to 2.3169 percent.
On the New York Mercantile Exchange, crude-oil futures shed $1.03, or 1.4 percent, to $74.61 a barrel and gold futures rose $13.60, or 1.2 percent, to $1,197.10 an ounce.
U.S. stocks were little moved on Monday, with the S&P 500 recording a 42nd record close of the year, as comments by European Central Bank President Mario Draghi helped offset data that unexpectedly showed Japan's economy in a recession.
—By CNBC's Kate Gibson
Coming Up This Week:
Wednesday
Earnings: Lowe's, Staples, Target, Williams-Sonoma, L Brands, JM Smucker, Keurig Green Mountain
8:30 a.m.: Housing starts
200 p.m.: FOMC minutes
Thursday
Earnings: Best Buy, Gap, Dollar Store, The Buckle, Ross Stores, Gamestop, Autodesk, Intuit, Marvel Tech, Mentor Graphics, Renren, Splunk
7:45 a.m.: Fed Gov. Daniel Tarullo
8:30 a.m.: Initial claims
8:30 a.m.: Consumer price index
10:00 a.m.: Existing-home sales
10:00 a.m.: Philadelphia Fed survey
10:00 a.m.: Leading indicators
1:30 p.m.: Cleveland Fed President Loretta Mester
8:30 p.m.: San Francisco Fed President John Williams
Friday
Earnings: Foot Locker, Ann
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