Investors have been encouraged this spring by data suggesting the economy's slide is slowing, sending major stock indicators up 30% to 40% from the 12-year lows they hit in early March. The market has been able to look past unsettling but widely expected events such as the bankruptcies of Chrysler and GM, as well as dismal reports on the labor market.
Market analysts warn that some pullback is likely in order for the market to maintain solid, sustainable gains. Straight-line advances tend to worry stock watchers as signs of indiscriminate buying that could quickly evaporate at the first sign of trouble.
William Rutherford, president of Rutherford Investment Management in Portland, Ore., said the report on pending home sales is encouraging because a rebound in home prices is necessary for the economy to recover. But he also thinks investors are reading too much into modest signs of improvement.
"The economy has to recover nicely to justify the recent run-up and I don't know whether it's got that much momentum in it," he said.
This week investors will be closely watching a stream of economic reports — particularly the monthly jobs data on Friday — for more signals on where to take the market next.
In technology news, data storage company EMC offered late Monday to buy Data Domain for $1.8 billion, or $30 per share. The all-cash offer came less than two weeks after NetApp made its own bid for the company at $25 a share.
Data Domain jumped $5.23, or 19.9%, to $31.58, while EMC rose 43 cents, or 3.5%, to $12.85. NetApp fell $1.35, or 6.5%, to $19.34.
The report on pending home sales lifted home builder stocks. Beazer Homes USA rose 24 cents, or 9.1%, to $2.87, while Toll Brothers rose 73 cents, or 3.9%, to $19.53.
About three stocks rose for every two that fell on the NYSE, where volume came to a light 1.41 billion shares compared with 1.5 billion shares Monday.
The Russell 2000 index of smaller companies rose 5.30, or 1%, to 526.63.
Interest rates on long-term Treasurys fell after jumping back and approaching last week's highs on Monday.
The yield on the 10-year Treasury note, which is used as a benchmark for home mortgages and other consumer loans, fell to 3.62% from 3.68% late Monday. Investors have been mindful in recent weeks of how rising yields could hamper an economic recovery by driving up interest rates.
The dollar was mixed against other major currencies, while gold prices rose.
Light, sweet crude fell 3 cents to settle at $68.55 on the New York Mercantile Exchange after finishing at its highest level of the year on Monday. Oil briefly rose to $69.05 Tuesday afternoon, a price not seen since early November.
Overseas, Britain's FTSE 100 fell 0.7%, Germany's DAX index rose less than 0.1%, and France's CAC-40 slipped less than 0.1%. Japan's Nikkei stock average rose 0.3%.