Stocks advanced amid several positive earnings reports and as debt concerns among peripheral euro zone countries faded for the moment.
The Dow Jones Industrial Average rose more than 45 points at the open after falling for a third straight session on Monday.
Hewlett-Packard, Bank of America , and American Express led blue-chips higher, whileVerizon and AT&T lagged.
The S&P 500 and the Nasdaq also advanced. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 17.
Most key S&P sectors gained, led by energy, financials and materials. Telecom fell.
The dollar traded flat against a basket of currenciesas the euro slipped. Worries about euro zone debt still lingered among some investors who turned to gold, pushing the price of the precious metal up for a second day to more than $1,377 an ounce.
Verizon announced a long-awaited partnership with Apple to sell the iPhone on Monday. Verizon said the iPhone will be available in February. Shares of the wireless carrier remained down about 2 percent, as the addition of the iPhone to Verizon's offerings could dilute earnings as it will have to subsidize the cost of the smartphone.
AT&T shares also remained lower as the arrangement was expected to pull customers from the wireless rival to Verizon, according to analysts.
Energy stocks rose as the price of oil rose above $90 a barrel, and officials said there was no word yet on when the Trans-Alaska would be restarted. A leak was discovered in the major pipeline last weekend.
Alcoa beat analysts' profit expectations in results posted after the market closed Monday, though the stock dropped as it has risen considerably in recent months.
In other earnings news, Sears soared after reporting a fourth quarter outlook that exceeded Wall Street's expectations as sales rose in several categories, including toys and sporting goods.
But Talbots plummeted after cutting its fourth quarter outlookand a reporting a sharp decline in same store sales so far this fiscal quarter, which ends Jan. 29.
Luxury retailer Tiffany reported a huge jump in holiday sales, and used the 11 percent year-over-year gain as reason to boost its full-year outlook for 2011. Shares gained in pre-market trading.
Also in retail, Macy's rose only slightly after Credit Suisse upgraded the department store retailer to "outperform" from "neutral," citing the likelihood that Macy's will continue to pay down debt, which will benefit stock holders.
Supervalu posted an unexpected loss for the quarter, causing the supermarket chain to lower its outlook, sinking its shares.
Also in earnings news, Lennar beat its profit target even though sales were lower than expected. Shares jumped 4.8 percent premarket.