Stocks posted record highs across the board on Monday, led by strong gains in health care and financials.
"I think the market is expecting a benign environment with interest rates where they are at," said Bob Phillips, managing principal at Spectrum Management Group. "Tax reform is still in the air, ... so that's helping keep a floor on stocks."
While some Wall Street experts have expressed concern over equity valuations, billionaire Warren Buffett said they made sense given where interest rate are. Buffett said rates have been a "powerful factor" in equity values.
The Federal Reserve has raised interest rates twice this year, with investors largely expecting a third rate hike in December, according to the CME Group's FedWatch tool.
The central bank "has somewhat of a reputation as the matador that dispatches bull markets with the sword of policy mistakes," said Nicholas Colas, co-founder of DataTrek Research, in a note to clients. Colas added, however, he does not see this happening. "Short-term rates are still very low by historical standards. And long-term rates seem fine with the Fed's stated balance sheet reduction goals."
Treasury yields fell on Tuesday. The short-term two-year yield slipped to 1.47 percent, while the benchmark 10-year yield fell to 2.33 percent.
In economic news, monthly auto sales data were being released throughout the day. General Motors, Ford, and Fiat Chrysler were among the automakers who reported better-than-expected sales.