New York - US stocks rose for a third straight day on Tuesday, pushing the S&P above 1 400 for the first time since early May, on growing optimism that the European Central Bank would act soon to contain the eurozone's debt crisis.
Trading was light, which could distort the level of optimism investors truly have that Europe will follow through with adequate measures. ECB President Mario Draghi boosted hopes last week when he spoke of restoring calm to the eurozone's troubled bond markets.
Since then, good news from Greece and declines in borrowing costs for Spain and Italy from peaks above 7% have kept sentiment positive. The relative calm allowed the S&P to break through the psychologically important 1 400 level after trying unsuccessfully the past couple of sessions.
"If the ECB expands its balance sheet, it will keep pushing these bond yields lower, which can help these countries finance their debt, giving markets a bit of reprieve," said Joseph Tanious, global market strategist at JP Morgan Funds in New York. "It's likely we won't get anything official for a few weeks, and until then investors are likely to be skittish."
Summer holidays have added to light trading volume, which has contributed to volatility. Equities cut their gains just before the close on Tuesday, mirroring Monday's late-day action.
About 6.39 billion shares traded on the New York Stock Exchange, the American Stock Exchange and Nasdaq, below last year's daily average of 7.84 billion.
The real tests for markets may come in September. The ECB is expected to face decisions about controlling the eurozone debt crisis and the Federal Reserve could take stimulus actions to aid the flagging US economic recovery.
The Dow Jones industrial average rose 51.09 points to 13 168.60. The Standard & Poor's 500 Index was up 7.12 points to 1 401.35, while the Nasdaq Composite Index was up 25.95 points at 3 015.86.
Despite worries over the economies of Europe and the United States, investors have pushed the S&P 500 up more than 11% so far this year. Yield-hungry investors have kept buying stocks as US and German government bond prices soar and yields hit historic lows.
Tuesday's advance was led by stocks in cyclical sectors like energy, materials and consumer discretionary, while defensive sectors like telecoms and utilities edged lower.
Energy stocks rose 1.3%, helped by Chesapeake Energy, which jumped after it said it would sell some assets and spend less on new properties. The stock surged 9.4% to $19.37 and was one of the top percentage gainers in the S&P 500.
Banking shares rose 0.5%, lifted by Morgan Stanley, which was up 2.5% at $14.50.
"Despite what seems like a weekly scandal of some sort, the banks have posted incredibly large profits. The Fed has made it very easy for them to take on very little risk and make very large profits," said Randy Frederick, managing director of active trading and derivatives for Charles Schwab in Austin, Texas.
Watch and fashion accessory maker Fossil Inc soared 32% to $91.77 after it forecast growth in Asia and Europe.
With 82% of S&P companies having reported quarterly results, 68% have beaten profit expectations, according to Thomson Reuters data.
Pfizer and Johnson & Johnson scrapped further studies of an experimental drug for Alzheimer's disease after the drug failed in a second trial. US-traded shares of their partner, Elan Corp, dropped 0.9% to $11.15. Pfizer fell 2.1% to $23.74 and J&J edged 0.8% lower to $68.29.
A group of investors rescued Knight Capital Group in a $400m deal that kept the market maker in business, but existing shareholders were nearly wiped out. Knight closed 0.3% lower at $3.06, erasing gains of more than 3% from earlier in the session.
Fin24 on Facebook,
Twitter and Google+.