Stocks Advance, Led by Materials; Vix Plunges

Stocks extended to their previous gains Tuesday after existing home sales fell less than expected and amid optimism over a confidence vote for Greece later this afternoon.

The Dow Jones Industrial Average climbed, led by Caterpillar and DuPont after posting its third straight gainin the previous session.

The S&P 500 gained and the tech-heavy Nasdaq turned positive for the year. The CBOE Volatility Index, widely considered the best gauge of fear in the market, plunged more than 10 percent to trade below 18.

Most key S&P sectors were higher, led by materials, energy and techs.

"Our short-term charts do indicate that we will see a minor rally unfold over the next few days, which we've been experiencing as of late," Michael McGervey president of McGervey Wealth Management told CNBC. "Our intermediate charts are showing a lot of probability that we will see lower prices over the next couple of weeks with the likelihood of rendering into a lull."

McGervey said he expects the 1,258 level on the S&P to be retested and the index could even fall further to the 1,237-1,249 area.

Euro zone finance ministers said the Greek government had until July 3 to approve new steps to get the next installment of 110 billion euros. Meanwhile, the market expects a vote of confidencein Greek Prime Minister George Papandreou new cabinet to pass on Tuesday—the first of three hurdles the government must clear to avert the euro zone's first sovereign debt default. The vote is due around 5 pm ET.

On the tech front, Oppenheimer lowered its price target on Apple to $420 from $450, citing possible delays on the firm's widely anticipated iPhone 5, which would lead to slower September sales. Apple has been trading below its 200-day moving average.

Research In Motion gained even after the BlackBerry maker lost a second marketing executive in the latest slew of bad news. The firm's market value has decreased by half this year. Meanwhile, Nokia unveiled a new smartphone that uses an old software that the firm had planned to discontinue.

Meanwhile, Credit Suisse downgraded MotorolaMobility to "underperform" from "outperform."

Citigroup released a note that said it expects pressure on the semiconductor sector through earnings season, but added that it is hopeful for a rebound in August, sending shares of Texas Instruments , Micron and Marvell up more than 2 percent each.

Best Buy jumped after the electronic retailer's board agreed to raise the quarterly dividend by 7 percentand approve a buyback plan for $5 billion in common shares.

On the earnings front, Walgreens reported a higher profit as sales of general merchandise and more profitable generic drugs rose. However, shares tumbled to lead the S&P laggards after the drug retailer said it failed to renew an agreement with pharmacy benefits manager Express Scripts .

Barnes & Noble also slipped after the bookstore chain reported a wider-than-expected loss as sales were under pressure from the going-out-of-business sales of bankrupt rival Borders.

Adobe Systems is slated to release its quarterly report after the bell.

WholeFoods jumped more than 6 percent to lead the S&P gainers after the upscale grocer's price target and rating was raised by BMO Capital Markets.

Oil rebounded from a four-month low as the euro gained against the dollarahead of a confidence vote in Greece. U.S. light, sweet crude gained above $94 a barrel, while London Brent crude rose above $112.

Meanwhile, BP advanced after one of the oil company's contractors WeatherfordInternational agreed to pay $75 million to settle all potential claims between the companies from the Gulf of Mexico oil spill.

In M&A news, Israeli electronic security systems maker Visonic said it was in talks to be acquired by Tyco International for $90 to $105 million.

On the economic front, existing home sales sales fell less than expected in May, according to the National Association of Realtors.

The FOMC begins a two-day meeting, with the announcement expected Wednesday afternoon, followed by a new conference from chairman Ben Bernanke. The Fed is expected to cut its growth forecast for 2011, but Bernanke will likely continue to argue the slowdown is temporary.

European shares closed higheramid expectations that policymakers can come up with a solution to save Greece from missing its July debt payment and avoid short-term contagion risk to euro zone peripheral countries.

Coming Up This Week:

TUESDAY: Earnings from Adobe
WEDNESDAY: Weekly mortgage apps, oil inventories, FOMC meeting announcement; Earnings from FedEx, Bed Bath & Beyond
THURSDAY: Weekly jobless claims, new home sales, money supply, Yahoo shareholders meeting; Earnings from ConAgra, Discover Financial, Oracle
FRIDAY: Durable goods, GDP, corporate profits

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