Stocks added to solid gains on Tuesday, pushing the Dow and S&P 500 to multi-year highs, as the market easily erased losses from Friday's sharp sell-off in the wake of turmoil in Egypt and investors focused on upbeat earnings and economic news.
The Dow Jones Industrial Average gained more than 140 points to trade above 12,000, after the blue-chip index posted its best January since 1997. The last time the Dow closed above the benchmark was June 19, 2008.
Most Dow components gained, led by Pfizer, Bank of America and Exxon Mobil .
The S&P 500 rose about 1.7 percent to exceed 1,305. 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 2 percent.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell more than 9 percent to below 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, financials and health care.
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, gained to close above 1,339 an ounce.
The gains in the market Tuesday follow subsiding fears over the unrest in Egypt, where the protests by thousands in Cairowent off peacefully. Citizens have been calling for the resignation of President Hosni Mubarak in demonstrations that started last Tuesday. Mubarak was expected to say in a speech later today that he will step down at the next election, but would stay in office until then, according to Al Arabiya TV.
The market rally was fueled by investors who were buying back positions that had been shed Friday when the protests in Egypt escalated, Brian Battle, vice president of trading at Performance Trust Capital Partners, told CNBC.com. With the future of Egypt uncertain, investors didn't want to be overexposed heading into the weekend, Battle said.
But as Egypt appeared to less , and the Egyptian military appeared to be in control, nobody wanted to get in the way of the market grinding higher, particularly as economic and earnings data continue to be strong, he said.
"The trend certainly is higher, and nobody wants to stand in the way of that," Battle said.
Longer term, there are reasons to be skeptical, however, he added, citing high unemployment, sluggish housing, and emerging food and energy inflation. The prices paid index in a report on nationwide manufacturingrose in January to the highest level since July 2008.
"That’s raw material inputs, so margins will get squeezed," he said.