After seeing considerable volatility during morning trading on Tuesday, stocks moved mostly higher over the course of the afternoon. The gains extended the upward move seen last week, which ended a three-week losing streak.
The major averages ended the day firmly in positive territory but off their early highs. The Dow advanced 125.86 points or 1 percent to 12,580.69, the Nasdaq jumped 33.46 points or 1.2 percent to 2,870.99 and the S&P 500 climbed 14.60 points or 1.1 percent to 1,332.42.
The volatility seen in morning trading came amid some mixed news out of Europe as well as relatively light trading activity following the holiday weekend.
A positive reaction to the latest news out of Greece contributed to early strength on Wall Street, with recent polls showing an increase in support for the political parties that back the austerity measures required for the debt-plagued nation to receive international bailout funds.
While the polls suggest that the anti-bailout Syriza party would still come in second, the pro-bailout New Democracy party could win enough seats to form a coalition government with the socialist Pasok party. The elections are scheduled to be held June 17th.
However, stocks pulled back rather sharply following news that Egan Jones downgraded Spain's credit rating to BB- from B.
"Spain will inevitably be faced with sizable payments to support its banking sector and for its weaker provinces," Egan-Jones said in a statement. "Assets of Spain's largest two banks exceed its GDP."
The news contributed to a sharp drop by the value of the euro, which traded at $1.25 versus the U.S. dollar at the close of trading on Wall Street.
Bargain hunting may have contributed to the upward momentum that re-emerged in the afternoon, as stocks continue to see notable weakness for the month of May.
The markets also likely benefited from speculation that China will announce further stimulus measures, which helped to overshadow a report from the Conference Board showing a notable deterioration in U.S. consumer confidence in the month of May.
In overseas trading, stock markets across the Asia-Pacific region moved to the upside during trading on Tuesday. Japan's Nikkei 225 Index advanced by 0.7 percent, while Hong Kong's Hang Seng Index surged up by 1.4 percent.
The major European markets also moved higher on the day. The U.K.'s FTSE 100 Index rose by 0.7 percent, while the German DAX Index and the French CAC 40 Index jumped by 1.2 percent and 1.4 percent, respectively.
In the bond market, treasuries ended the day modestly higher but well off their best levels. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, ended the day down by 1.4 basis points at 1.731 percent after hitting a low of 1.707 percent.
While strength was visible in a variety of sectors, steel stocks posted particularly strong gains amid optimism about the outlook for global demand. Reflecting the strength in the steel sector, the NYSE Arca Steel Index surged up by 2.9 percent.
Networking stocks also moved sharply higher over the course of the trading day, driving the NYSE Arca Networking Index up by 2.6 percent. Polycom (PLCM) and Acme Packet (APKT) turned in two of the sector's best performances.
Significant strength was also visible among housing stocks, as reflected by the 2.5 percent gain posted by the Philadelphia Housing Sector Index. The strength in the housing sector came amid a positive reaction to a Standard & Poor's report on home prices.
Chemical, semiconductor, brokerage, and oil service stocks also posted strong gains, moving higher along with most of the other major sectors.
Meanwhile, gold stocks bucked the uptrend, resulting in a 2.1 percent loss by the NYSE Arca Gold Bugs Index. The weakness in the sector came as gold for June delivery tumbled $20.20 to $1,548.70 an ounce.
While news out of Europe is likely to remain in focus during trading on Wednesday, investors are also likely to keep an eye on a report on pending U.S. home sales.
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