The Dow Jones industrial average gained 88.43 points, or 0.86%, to 10,314. The broader Standard & Poor's 500-stock index was up 10.26 points, or 0.93%, to 1,117.56. The Nasdaq composite index added 18.57 points, or 0.97%, to 1,938.72.
The focus Tuesday is the Federal Open Market Committee meeting, when the Federal Reserve will decide the direction of interest rates. Most economists believe the Fed will keep rates steady at the meeting, but the market is predicting a hike at the August meeting.
"The Street fears that the Fed will intimate that monetary policy will shift to neutral which will mean higher rates," says economic research outfit Informa Global Markets. "So the Street will try to extract 'when' from the nuances in the statement."
Economic reports coming Tuesday include factory orders and more April sales figures from auto makers.
Monday's economic data continue to indicate strength. The Institute for Supply Management's survey of manufacturing activity came in strong, but not much changed, at 62.4, vs. a prior 62.5 and a median estimate of 63.0. The orders index now stands at 65.0, vs. a prior 65.7, holding up nicely. Prices paid 88.0, vs. 86.0 and expectations of a small drop. Employment continues ahead at 57.8, vs. 57.0.
Construction spending in March rose a strong 1.5% from February to $944.1 billion, vs. a consensus forecast of +0.7% and also marking a new high, following a gain of 0.4% in February and a 0.4% drop in January.
Friday's April non-farms payroll report will be the data highlight of the week. Economists are predicting a rise of 170,000 new jobs in the month.
On Monday, oil, biotech, and software stocks rose and supported the broader market. Semiconductor stocks lost steam, after being up for part of the session on news from the Semiconductor Industry Assoc. that 3-month moving average sales rose 32.3% in March to $16.3 billion.
Adobe Systems (ADBE
) shares rose Monday after the software maker forecast that it will exceed second-quarter financial targets.
) and Wyeth (WYE
) were both higher following FDA approval of their plaque psoriasis drug Enbrel.
Shares of Dow component Boeing (BA
) were up 3% on news that the company increased its dividend and resumed its stock buyback.
) reported first-quarter earnings per share of 5 cents, vs. a 23-cents loss (GAAP) a year ago, on a 6% revenue rise. It reaffirmed its 2004 operating income before amortization in the range of $1 billion to $1.2 billion. The shares fell.
United Online (UNTD
) shares rose after the company reported first-quarter EPS of 18 cents, vs. 10 cents a year ago, on a 46% revenue rise. It sees $110 million to $112 million in second-quarter revenue. Piper Jaffray says the quarter was solid.
First-quarter earnings season slows down this week. Companies on the earnings calendar Tuesday include Tyco International (TYC
), Northrop Grumman (NOC
), Qwest Communications (Q
), Tenet Healthcare (THC
), and more.
Treasuries finished mixed despite more strong economic data, with the FOMC meeting on Tuesday overshadowing trading following the fresh high yields set on Friday, says Informa Global Markets.
Some traders talked about comments over the weekend by Warren Buffett, who warned that the Fed, in keeping rates too low, may speed up inflation while heating up the economy. He also said the growing trade deficit is continuing to weaken the dollar, and could keep further pressure on the dollar despite a strengthening economy.
London's stock, bond, foreign exchange, and energy markets were closed for the May Day holiday. Other major European stock markets finished higher.
Germany's DAX index rose 22.44 points, or 0.56%, to 4,007.65. There was little reaction to a report German PMI rose to 55.3 on April from 54.1 in March.
In Paris, the CAC 40 index was up 31.2 points, or 0.85%, to 3,705.48, with some help from a report French API rose to 53.5 in April from 53.2 in March.
Japan's equity market is closed for Golden Week -- trading will resume on Thursday, May 6.
In Hong Kong, the Hang Seng index gained 7.66 points, or 0.06%, to close at 11,950.62 as sentiment continued to be weighed down by China woes and possible rate hikes in the U.S.