U.S. stocks rose slightly on Tuesday as investors looked forward to a pivotal Federal Reserve decision.
The S&P 500 rose 0.48% to 4,175.48. The Dow Jones Industrial Average gained 67.29 points, or 0.20%, to close at 33,128.79. The tech-heavy Nasdaq Composite added 0.22% to finish at 12,563.76.
Tuesday's gains built on a late rally from the previous session, which saw all three major averages erase sizable losses to close higher for the day.
"For the first time in several days, sellers appear exhausted, and shorts are a bit nervous than longs (there aren't many people who feel 'the' bottom is in, but even bears are anxious about a sharp rebound rally)," Adam Crisafulli of Vital Knowledge said in a note to clients.
Those positive moves for stocks come ahead of a widely anticipated Federal Reserve decision on Wednesday.
Wall Street is largely expecting the central bank to raise rates by 50 basis points this week, while some investors believe expectations of aggressive monetary tightening from the central bank are already priced into markets.
Billionaire hedge fund manager Paul Tudor Jones said on CNBC's "Squawk Box" Tuesday that, with the Fed tightening and signs that the economy is slowing, capital preservation should be the main goal for investors.
"You can't think of a worse environment than where we are right now for financial assets. Clearly you don't want to own bonds and stocks," Jones said.
Tuesday's gains were broad in the S&P 500, but led by the energy sector. Exxon Mobil added more than 2%, and EOG Resources rose 3.8%. Defensive sectors such as health care and utilities also outperformed, with Pfizer gaining nearly 2% after reporting a stronger-than-expected first quarter.
Financials were another bright spot, with JPMorgan and Morgan Stanley each rising more than 2%.
Stocks are coming off a brutal stretch of weeks. April was the worst month since March 2020 for the Dow and S&P 500. It was the worst month for the Nasdaq since 2008.
"We think the data continues to paint a picture of extreme fear and a contrarian opportunity for longer-term investors, even though there is scope for further movement/more downside in the very near term on some gauges," RBC strategist Lori Calvasina said in a note to clients.
The S&P 500 is trading in correction territory, down about 13% from its record highs, but the size and length of this drawdown is in line with historical corrections, according to LPL Financial.
The expected rate hike comes as there are growing concerns about the global economy, due in part to China's lockdowns and the war in Europe.
"Markets continue to be hostage to the China Covid-19 response and the geopolitics, which are overshadowing what is still a very resilient fundamental picture," JPMorgan strategist Mislav Matejka said in a note to clients.
The benchmark 10-year Treasury yield retreated after hitting a new milestone on Monday. The bond yield hit 3.01% during the previous session, its highest point since December 2018, but fell back below the 3% level on Tuesday.
Corporate earnings reports were spurring individual stock moves on Tuesday.
Chegg's stock price plummeted roughly 30% after the textbook company issued weak guidance for the full year despite exceeding earnings expectations. Expedia and Hilton tumbled 14% and about 4.2%, respectively, after their quarterly reports.
On the positive side, shares of Clorox rose nearly 3% after the company's fiscal third-quarter results topped expectations. Chemical stock Chemours surged more than 17% after the company raised its guidance and showed success raising prices.
There were some positive signs for the economy on the data front. Factory orders for March rose 2.2%, better than expected. Job openings came in at 11.5 million, an all-time high.