Stocks closed broadly higher on optimism that help was on the way for Greece to deal with its heavy debt burden.
Europe appeared to be moving closer to working out some kind of rescue plan despite conflicting reports earlier in the day. The Wall Street Journal reported just before the closing bell that Germany is considering loan guarantees for Greece and other troubled European countries.
Stocks had been holding around 1 percent gains for the session but staged a powerful surge as speculation swirled over the sovereign debt issue. The rally came after a late-day selloff Monday that sent the Dow to a sub-10,000 close for the first time since November.
"Certainly it's a step in the right direction. A lot of the selloff was due to concerns about the sovereign debt," said Todd Salamone, senior vice president of research at Schaeffer's Investment Research in Cincinnati. "Now there's a potential solution in the works. That would at least buy time with the situation."
While the broad market gained from optimism over the potential for Greece help, US-traded shares of Deutsche Bank jumped nearly 8 percent.
Energy, industrials and materials led sector gainers on the S&P, each registering gains of more than 2 percent. Health care and financials trailed but were still positive.
Gains also were limited just a bit on the technology side after Electronic Arts disappointed investors Monday with earnings results and expectations that trailed forecasts. The bad news carried into today's trading and sent the company's shares down nearly 10 percent to be the biggest drag on the Nasdaq.
The rally also ran into a brief stumbling block after bank stocks fell on a downgrade from Standard & Poor's.
Bank of America briefly shed nearly 1 percent after S&P cut its rating for BofA and Citigroup to "negative" on worries that a second bailout of the banks would leave bond holders dry.