Stocks finished higher Tuesday, extending the previous session's rally as investors digested a fresh mix of earnings reports and unexpectedly solid economic data. Morning weakness attracted bargain hunters, while oil prices fell on optimism that Israeli-Hezbollah fighting will be contained, says Standard & Poor's Equity Research.
The Dow Jones industrial average rose 52.66 points, or 0.48%, to 11,103.71. The broader Standard & Poor's 500 climbed 7.97 points, or 0.63%, to 1,268.88. The tech-heavy Nasdaq composite added 12.06 points, or 0.58%, to 2,073.9.
NYSE breadth was solidly positive, with 22 issues advancing for every 11 declining, while Nasdaq breadth was 18-12 positive.
Traders were sifting through stronger-than-expected reports on consumer sentiment and the housing market Tuesday. Consumer confidence rose unexpectedly to 106.5 in July, from 105.4 in June. Existing home sales dipped 1.3% to 6.62 million units in June.
Incoming data may not allow the Fed to take a reprieve from its inflation-fighting efforts, some analysts say. "After the big move in the market's pricing of the August FOMC meeting during this past week, it appears we may be headed for yet another flip-flop that inflicts even more damage to Bernanke's credibility -- and the Fed's," notes Morgan Stanley economist David Greenlaw.
Others still see the economy slowing. "Although July confidence and the assessment of the labor market improved slightly in July, the readings on both of these were in line with their second-quarter averages," observes John Ryding, chief U.S. economist at Bear Stearns.
Data releases Wednesday include the Fed's beige book report. The report is unlikely to shed light on how long the Fed will raise interest rates, says Action Economics.
Earnings season was also in the spotlight Tuesday. AT&T (T) was the Dow's leading gainer after the telecom giant said its second-quarter profit climbed 81%.
Meanwhile, Altria (MO) was modestly higher after the food and tobacco giant reported a 1.6% increase in second-quarter profit and lifted its full-year forecast.
Fast-food heavyweight McDonald's (MCD) was little changed despite a 60% gain in quarterly profit amid solid U.S. and European sales.
Shares in Dupont (DD) edged up after the chemical maker posted 3.9% lower second-quarter profit amid rising costs for oil and other raw materials.
Among other Dow components, 3M (MMM) was down after the manufacturer posted a 17% increase in second-quarter profit, at the low end of guidance issued less than three weeks earlier.
In tech, Texas Instruments (TXN) was up after the chipmaker said second-quarter earnings nearly quadrupled as sales rose 24%.
Shares in oil and gas services company Smith International (SII) rose on news of a jump in second-quarter profit on 29% higher revenue.
Online video-rental service Netflix (NFLX) was sharply lower, as second-quarter profit nearly tripled but the company was forced to boost spending to compete with an online service from rival Blockbuster (BBI).
Companies set to post quarterly results Wednesday include Anheuser Busch (BUD), General Motors (GM), Phelps Dodge (PD), and Monster Worldwide (MNST).
In analyst calls, communication equipment and software provider Avaya (AV) was lower after Merrill Lynch trimmed its recommendation on the stock from buy to neutral.
In the energy markets, September West Texas Intermediate crude oil futures closed down $1.30 at $73.75 a barrel ahead of weekly inventory data due Wednesday.
European markets finished mixed. In London, the Financial Times-Stock Exchange 100 index gained 17.3 points, or 0.3%, to 5,851.2. Germany's DAX index slipped 12.29 points, or 0.22%, to 5,565.76. In Paris, the CAC 40 index was up 18.19 points, or 0.37%, to 4,933.12.
Asian markets finished higher. Japan's Nikkei 225 index rallied 210.74 points, or 1.42%, to 15,005.24. In Hong Kong, the Hang Seng index advanced 103.27 points, or 0.63%, to 16,583.86. Korea's Kospi index was up 16.42 points, or 1.3%, to 1,279.77.
Treasury yields swung higher on the stronger-than-expected consumer confidence and existing home sales figures. The 10-year note slipped in price to 100-14/32 for a yield of 5.06%, while the 30-year bond fell to 90-16/32 for a yield of 5.13%.