The stock market managed to carve out modest gains amid news of a rebound in consumer confidence and more healing in the housing industry.
Financials, retailers and homebuilders were the day's biggest winners. A sharp drop in energy stocks kept a lid on the market's advance.
While investors were pleased by positive reports on consumers and housing, trading was choppy, as it has been in recent sessions.
The Dow Jones industrial average surged more than 100 points immediately after the confidence report was released, but came off its highs shortly after. The blue-chip index closed at 9,539.29, up 30.01, or 0.32%. The other major stock indexes also pulled back. The Standard & Poor's 500 index finished at 1,028.00, up 2.43, or 0.24%. The Nasdaq composite index rose 6.25, or 0.31%, to 2,024.23.
The Conference Board's consumer confidence index rose to 54.1 this month from an upwardly revised 47.4 in July and far above the 47.5 reading analysts expected.
Despite the improvement, the reading is still a long way from showing that consumers are actually feeling optimistic about the economy, which is vital to any potential recovery. Investors' concerns about flagging consumer confidence have triggered bouts of stock selling in recent weeks.
Stocks got a boost from President Obama's reappointment of Bernanke as Federal Reserve chairman and a jump in home prices.
Bernanke's reappointment, though expected, came sooner than anticipated and removed any uncertainty about a potential replacement. Bernanke's aggressive moves to limit the damage from the financial crisis, including keeping interest rates at historic lows, have been credited with guiding the economy away from its worst recession since the 1930s.
Meanwhile, the Standard & Poor's/Case-Shiller U.S. National Home Price Index rose 1.4% in the second quarter from the January-March period, the first quarterly increase in three years. Home prices, while still down almost 15% from last year, are at levels last seen in early 2003.
The improvements in consumer confidence and housing are related. If consumers are feeling better about the economy, they will be willing to spend a little more on houses, not to mention cars, appliances and other goods and materials. Investors' concerns about flagging consumer confidence have triggered bouts of stock selling in recent weeks.
About two stocks rose for every one that fell on the New York Stock Exchange, where volume came to 852.3 million shares, compared with 912.3 million at the same time on Monday.
In other trading, the Russell 2000 index of smaller companies rose 2.98, or 0.5%, to 583.22.
A sharp drop in oil kept a lid on the market's gains. Oil prices tumbled $2.32 to settle at $72.02 a barrel on the New York Mercantile Exchange, bringing energy-related stocks down with them. Halliburton Co. fell 88 cents, or 3.5%, to $24.40. Chesapeake Energy Corp. lost 52 cents, or 2.2%, to $23.42.
The moderate advance on Tuesday follow a trend seen in the market throughout the summer, where any dip in stocks or pause in trading is met with more buying as investors fear missing out on an extended rally.
Despite improving economic data, the market is still generally cautious. After a 52% climb in the S&P 500 since early March, investors are questioning how much further stocks have to go, especially in the absence of data showing actual growth in the economy.
"The fear I have is that it's still a trader's market," said Steven Stahler, president of The Stahler Group. "You've got a lot of activity ... but not real legs."
Shares of major homebuilders surged after the home price data. Hovnanian Enterprises. jumped more than 6%, adding 28 cents to $4.57, while Lennar rose 40 cents, or 2.8%, to $14.97.
Financial stocks rebounded after sagging on Monday in response to a downbeat analyst's report. Bank of America rose 40 cents, or 2.3%, to $17.75. PNC Financial Services rose 91 cents, or 2.2%, to $42.02.
Retailers also rose. Shares of Big Lots soared more than 6%, adding $1.57 to $25.60 after its second-quarter results beat analysts' expectations and the discount retailer raised its full-year earnings forecast. Best Buy jumped $1.10, or 3.07%, to $36.91.
Bond prices came off earlier lows and moved slightly higher after an auction of $42 billion in two-year notes was met with adequate demand. The Treasury Department is issuing a total of $197 billion in debt this week, and investors have been worried that with so much supply flooding the market, demand would slump and force the government to raise the interest it pays to lure buyers.
The yield on the benchmark 10-year Treasury note dipped to 3.45% from 3.48% late Monday. The yield on the two-year note was unchanged at 1.03%.
The dollar mostly fell against other major currencies, while gold prices rose.
The gains in the U.S. came amid mixed trading in overseas markets. Japan's Nikkei stock average fell 0.8%. Britain's FTSE 100 rose 0.4%, Germany's DAX index rose 0.7%, and France's CAC-40 gained 0.8%.