S&P 500 and Nasdaq close higher as tech leads broad market gains

The economy will likely continue growing into the fall, strategist says

Stocks rose on Tuesday, building on the strong performance from the previous session, on the back of broad market gains and solid economic data.

The S&P 500 gained 0.5% to close at 3,401.20 and the Nasdaq Composite advanced 1.2% to 11,190.32. The Dow Jones Industrial Average closed just above the flatline at 27,995.60 after rising as much as 237 points. 

Microsoft jumped 1.6%. Amazon and Alphabet each rose 1.7%. Netflix gained 4.1% and Facebook closed higher by 2.4%. Tesla shares, meanwhile, popped 7.2% after surging more than 12% on Monday. Tuesday marked the second straight solid performance for Big Tech after the group's sharp sell-off last week, which pressured the broader market.

Other parts of the market participated in Tuesday's move higher. The S&P 500 real estate and utilities sectors were up 1.4% and 0.7%, respectively. Materials, industrials and health care were also higher. 

"The market is doing its best to prove that buying the dip still is in vogue," said Frank Cappelleri, executive director at Instinet. "The bottom line is that the market continues to have broad participation And that's the most crucial characteristic to maintain going forward."

Bank stocks struggled, however, with Citigroup falling 0.9%. JPMorgan Chase dropped more than 3% and Bank of America closed 1.8% lower. Goldman Sachs ended the day down 1.7%. The losses in JPMorgan and Goldman weighed on the Dow. 

The broader market also got a boost after China reported its first retail sales increase for the year. The country's National Bureau of Statistics said Chinese retail sales rose 0.5% in August. The Shanghai Composite closed 0.5% higher on Tuesday. 

This puts China "on track to return to its pre-virus growth rate before the end of the year," said Julian Evans-Pritchard, senior China economist at Capital Economics. "Retail sales surpassed 2019 levels for the first time since the COVID-19 outbreak, while investment and output growth continued to strengthen" last month. 

In the U.S., the Empire State Manufacturing index came in at 17 for September, rebounding from a print of 3.7 in August. Economists polled by Dow Jones expected the index to come in at 7.

Tuesday's gains came after a the major averages popped more than 1% on Monday, boosted by a slew of dealmaking activity and a rally in tech stocks. Hopes around a potential coronavirus vaccine also lifted sentiment on Monday. 

"Regardless of the situation, regardless of the sector, big commitments and big mergers tend to show confidence, and we would take those as positive signs," said Jeff Buchbinder, an equity strategist at LPL Financial.

Traders also looked ahead to the Federal Reserve concluding its two-day policy meeting on Wednesday.