Stocks continued to rise Tuesday, nearly erasing losses from Friday's sell-off in the wake of turmoil in Egypt.
The Dow Jones Industrial Average gained more than 100 points, after posting its best January since 1997.
Pfizer, Bank of America and Alcoa led Dow components higher, while McDonald's slipped.
The S&P 500 rose more than 1 percent to reach 1,300. The last time the S&P 500 closed above 1,300 was Aug. 28, 2008, although it came close last Thursday, just before the turmoil in Egypt sent it spiraling down 1.8 percent.
The Nasdaq also advanced, rising more than 1 percent.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell more than 10 percent to nearly 18. The VIX had climbed 24 percent last Friday as the unrest in Egypt escalated.
All key S&P 500 sectors gained, led by materials, energy and technology.
The dollar slipped against a basket of currencies, as the euro hit a 2 1/2-month high against the U.S. currency. The price of gold, meanwhile, fell below 1,330 an ounce as investors continued to flock to riskier assets.
The market gains follow subsiding fears over the unrest in Egypt, where the army on Tuesday pledged not to clamp down on protests by thousands in Cairo.
Investors will continue to monitor the political unrest in Egypt closely on Tuesday. Protesters have been calling for the resignation of President Hosni Mubarak in demonstrations that started last Tuesday.
Egypt is not a major oil producer, but nearly 3 million barrels a day moves through the Suez Canal and the Sumed pipeline, and investors fear of a contagion spreading to other oil producing countries in the region has helped spark a run in oil prices. The price of light sweet crude fell slightly to under $92 a barrel, while Brent crude rose above 101.
Earnings as well as strong euro-zone manufacturing data reported on Tuesday lifted market sentiment at the outset.
Companies representing more than half the market cap of the S&P 500 have reported earnings so far, with 71 percent exceeding their estimates, according to UBS Wealth Management Research. But unlike past quarters, UBS said, companies are beating on revenue results as well as earnings.
UPS beat analyst estimates with profit of $1.08 a share, sending its shares up more than 4 percent.
Pfizer shares gained after the pharma giant beat Wall Street estimatesand announced plans to cut its research and development spending. Pfizer did, however, also cut its forward guidance.
Energy was the strongest-performing sector on Tuesday, up 2.5 percent on rising oil prices and Exxon Mobil's strong earnings report.