Bank of America, meanwhile, announced it is leaving the wholesale mortgage lending business to focus on loans to consumers and community banks.
Several banks, including Bank of America, were among the top-performing stocks after JPMorgan said it expects large-cap bank earnings to beat third-quarter estimates on strong mortgage-banking revenues.
The brokerage raised its third quarter earnings per share view and 2010 earnings view for Bank of America. The brokerage also raised its price target for Citigroup , Fifth Third Bancorp , PNC Financial , SunTrust Banks, U.S. Bancorp, and Wells Fargo .
Tech shares were mostly higher across the board. Microsoft rose after the tech giant said itis planning to have a tablet computer by Christmas, although it's unclear whether it will be on sale by that time or who will make it.
Speaking at the London School of Economics, Microsoft Chief Executive Steve Ballmer said: "You'll see new slates with Windows on them. You'll see them this Christmas," according to Reuters.
Meanwhile, Microsoft was downgraded by another brokerage. Janney Capital Markets cut its rating on the company to "neutral" from "buy," citing the company's unclear strategy for a smartphone operating system. This comes after the firm was downgraded by Goldman Sachs on Monday.
Apple shares climbed after Jefferies started coverage of the iPod maker with a "buy" rating and a $365 price target. Meanwhile, Global Equities raised its price target to $350.
Meanwhile, iPad sold three million units in the first 80 daysafter its April release and its current sales rate is about 4.5 million units per quarter, according to Bernstein Research. The sales rate is blowing past the one million units the iPhone sold in its first quarter and the 350,000 units sold in the first year by the DVD player, the most quickly adopted non-phone electronic product.
Intel shares rose after Intel CEO Paul Otellini said the U.S. government should provide tax credits or tax holidaysfor companies that build factories in the U.S. and create jobs. Otellini spoke at an event sponsored by the Council on Foreign Relations.
Oracle shares were higher after Canaccord Genuity started coverage of the firm with a "buy" rating.
In addition, Autodesk and Salesforce.com also advanced after Janney raised its fair value estimate on both companies.
Shares of Chevron rose after the oil company said it would start buying back its own shares in the fourth quarter as part of a buyback program approved earlier by its board to repurchase between $500 million and $1 billion of its shares. Meanwhile, oil prices rose above $82 a barrel.
Home Depot shareswere slightly higher, despite Goldman Sach's decision to cut the shares to "neutral" from "buy."
Walgreen shares rose after posting a stronger-than-expected rise in September same-store sales because of an uptick in pharmacy sales.
Gymboree jumped more than 5 percent after the firm hired Goldman Sachs to begin a formal auction of the children's clothing retailer, The New York Post reported, citing sources familiar with the situation.
However, Talbots tumbled more than 10 percent after the women's clothing retailer said sales would fall in the current quarter instead of rising, as had been previously forecast.
Meanwhile, government advisers in Saskatchewan urged the province not to oppose a takeover, of Potash by BHP Billiton arguing that any possible China-based bid could harm Saskatchewan's economy.
Volume on the consolidated New York Stock Exchange was 4.7 billion shares. On the NYSE floor, 1.2 billion shares changed hands, with advancers outpacing decliners about 5 to 1.
In the day's economic news, the Institute of Supply Management’s non-manufacturing indexrose to 53.2 in September, up from 51.5 in August. Analysts had expected to the index to be largely unchanged. The report also showed hiring in the sector picked up, as the employment index rose to 50.2, above 48.2 in August, and new orders rose to 54.9 from 52.4.
"What we are expecting immediate bottom-line profitability: companies are so lean, any new order will have a higher profit margin," said Pado of Cantor Fitzgerald. "These types of numbers are very supportive of an improving fourth quarter."
Some market participants were cautious. Elliot Spar, market strategist at Stifel Nicolaus, said he's advising people to take profits. He doesn't recommend investors short the market, however, "not until we see more technical evidence of a top, which we don’t see yet."
Ahead of this week’s IMF/World Bank meeting, the 16 nations that use the euro are urging China to let the value of its currency riseto help stimulate global economic growth. None of the world's economic powers wants a strong currency right now as a weaker currency provides a competitive advantage.
Jean-Claude Juncker of Luxembourg, the head of the euro group, wants to see a "broad-based appreciation" of the Chinese yuan against the dollar and other major currencies. He said he expressed the view at a meeting Tuesday with Chinese Prime Minister Wen Jiabao.
Also in Europe, Moody's warned that it may cut Ireland's credit rating again, pointing to the huge bill for cleaning up its banks announced last week, a weak economic recovery and rising borrowing costs.
Gold rallied to record highs near $1,340 an ounceas recent volatility in the currency markets boosted demand for the metal as a safe haven.
On Tap This Week:
WEDNESDAY: Weekly mortgage applications; Challenger job-cut report; ADP employment report; weekly oil inventories; CTIA Wireless; Earnings from Costco and Monsanto
THURSDAY: Monthly chain store sales; BoE announcement; ECB announcement; Kansas City Fed Pres Hoenig speaks; Consumer credit; Mosaic shareholder meeting; Earnings from PepsiCo and Alcoa
FRIDAY: Monthly non-farm payroll; Wholesale trade; NY Comic Con; IMF, World Bank annual meetings
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