Stocks pointed to a higher close Tuesday after a handful of economic data helped boost market confidence and after Fed chairman Ben Bernanke said failure to raise debt ceiling could result in severe market disruption.
The Dow Jones Industrial Average soared, surpassing the 12,000-mark after squeezing out a small gainMonday.
Home Depot , Caterpillar and Boeing led the blue-chip gainers. Cisco was among the laggards after RBC cuts its rating on the tech bellwether to "underperform" from "outperform" and price target to $14 from $22.
The S&P 500 and the tech-heavy Nasdaq also climbed. The CBOE Volatility Index, widely considered the best gauge of fear in the market, tumbled almost 10 percent to trade below 18.
The Dow and Nasdaq are seeing their best gains since Apr. 20, while the S&P is having its best day since Mar. 21.
All key S&P sectors were in the green, led by growth plays energy, industrials and materials.
“The rally has a lot to do with technicals,” according to Alan Valdes, director of floor operations at DME Securities, noting that markets tend to see a bounce ahead of options expiration.
“Bulls are looking for a good reason to buy at depressed levels,” said Michael Gault, senior portfolio strategist for Weiser Capital Management. “The key is whether the rally will be sustained through the end of the day—that’s more telling.”
Bernanke warned that a failure to lift the government's debt ceiling risks a loss of confidence in America's creditworthiness, saying the U.S. could lose its AAA credit rating and the greenback's status as the reserve currency could be damaged.
"Even a short suspension of payments on principal or interest on the Treasury's debt obligations could cause severe disruptions in financial markets and the payments system," Bernanke said at an event sponsored by the Committee for a Responsible Federal Budget.
Stocks tumbledlast week after Bernanke acknowledged the economic slowdownduring a banking conference in Atlanta.
Oil prices gainedas U.S. light, sweet crude rose $2.07 to settle at $99.37 barrel, while London Brent crude climbed $1.06 to settle at $120.16. Gold climbed $8.80 to settle at $1,523.80 an ounce. (Read More: Gold to Reach $5,000 Due to Supply Shortage)