Stocks rose sharply Tuesday on Wall Street as traders turned their focus back to corporate news from the U.S. and hopes that the Federal Reserve will come up with a plan to jump-start the economy. Banks and materials stocks led the market higher.
The Dow Jones industrial average soared 95.51 points to 12,837.33, its highest close in a month. Microsoft was one of the biggest gainers in the Dow. The stock jumped 3 percent after the company announced a new tablet computer called Surface to compete with the immensely popular iPad from Apple. Microsoft was up 86 cents at $30.70.
Stock traders are also latching on to recent signals from the Federal Reserve that the central bank may reveal plans to stimulate the economy at the end of its two-day meeting today.
"A good portion of today's strong market action is from a hope factor that we're going to get more easing from the Fed," said Peter Cardillo, chief market economist at Rockwell Global Capital.
Economists say that even if the Fed does not act after its meeting, it will send a clear message that it is standing by to do so if needed.
Financial companies were among the best performing stocks as investors hoped for Fed action: Bank of America soared 4.5 percent, Citigroup gained 3.5 percent, JPMorgan Chase was up 2.2 percent and Morgan Stanley rose 3 percent.
Bank investors were also pleased to learn that a federal housing agency will clarify the process under which home lenders are forced to buy back soured home loans. The buybacks have cost banks billions of dollars.
In other trading, the Standard & Poor's 500 index rose 13.20 points to 1,357.98. Seven of the 10 industry groups in the S&P rose. The technology-heavy Nasdaq composite index rose 34.43 points to 2,929.76. The Dow Jones Utility average touched the highest level since August 2008 before closing slightly lower.
In Europe, borrowing costs eased for Spain: Its benchmark 10-year bond yield fell below the key 7 percent level to 6.99 percent.
Spain raised $4.28 billion in an auction of 12- and 18-month bills, more than analysts had expected. However Spain's cost to raise the money skyrocketed. The Spanish government had to pay an interest rate of 5.07 percent for the 12-month bills, up sharply from 2.98 percent at the last such auction on May 14.
Still, investors were heartened to see that people were willing to lend Spain money.
"Even though it cost Spain dearly and yields rose to a record, the fact is that it was not shut out of the markets," Cardillo said.
Major European stock markets rose: Spain's IBEX 35 index rose 2.7 percent. Germany's DAX added 1.8 percent, and France's CAC-40 rose 1.7 percent.
The dollar and Treasury prices fell as traders moved money out of low-risk assets. The dollar fell about a penny against the euro to $1.27, and the yield on the 10-year Treasury note rose to 1.62 percent from 1.58 percent late Monday.