Stocks gained Tuesday amid a low-volume session, led by gains in energy, as the dollar declined to a one-month low.
The Dow Jones Industrial Average was up more than 50 points, led by Alcoa, Intel and McDonald's , after finishing lower for the fourth straight session Monday.
The S&P 500 and the tech-heavy Nasdaq climbed. The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell below 18.
Most of the key S&P sectors gained, led by energy, financials and consumer discretionaries.
The S&P 500 has tumbled more than 5 percent since a recent high at the start of May and closed at its lowest level since March 18, having fallen through its April low in the last session. Some investors look for further volatility and a possible move lower before equities stabilize.
“We were oversold for four weeks so we’re seeing a little rebound here—we expect a bounce,” said Alan Valdes, director of floor operations for DME Securities, but added that volume has been quite light and that investors are “still scared” to get in.
Valdes noted that June is historically a down month and added that trading will likely be volatile throughout the summer with the S&P trading near 1,280 on the downside and 1,350 on the upside.
“This market was really fueled by the Fed,” he said, adding that stocks could tumble as much as 6 percent if there is no QE3.
Banks were among the biggest gainers after selling off heavily in the recent weeks with JPMorgan and Barclays advancing almost 2 percent each.
Among banks, Regions Financial said it will repurchase $1 billion in credit card accounts from Bank of America's
However, Morgan Stanley traded flat after the banking giant said it may cut the number of brokers in its wealth management division. The announcement follows a layoff of about 300 brokers during the previous quarter.
Meanwhile, Disney announced it will cut around 200 jobs at its movie studio, according to a Reuters report as it reduces its focus on home entertainment distribution of DVDs.
Oil prices climbed, but gains were limited amid expectations that OPEC might raise its production target this week. Brent crude traded above $115 a barrel while U.S. light, sweet crude traded around $99 a barrel.
The dollar declined to a one-month low against a basket of currencies, putting a floor on commodity prices, after a Chinese official said the greenback would continue to weakenversus other major currencies.
And material stocks showed stregnth with stocks such as Freeport McMoran , Rio Tinto and BHP Billiton climbing.
General Motors said May vehicle sales in China fell 2.7 percent, its second consecutive monthly decline amid a slowdown in the world's largest market. Meanwhile, Ford CEO Allan Mulally is expected to tell investors the automaker plans to increase sales by 50 percent over the next four years.