After the close, Alcoa (AA, Fortune 500) said it will cut at least 13,500 jobs, or 13% of the company's worldwide workforce by the end of the year, as a means of cutting costs. Alcoa stock was volatile in extended-hours trading.
The Dow Jones industrial average (INDU) rose 0.7%. The Standard & Poor's 500 (SPX) index gained 0.8% and the Nasdaq composite (COMP) climbed 1.5%.
"The market as a discounting mechanism is looking forward to the second half and beyond, when the fiscal and monetary stimuli start having an impact and the economy begins to stabilize," said J. Stephen Lauck, president and CEO at Ashfield Capital Partners.
Stocks held on to morning gains and then moved higher, even after the 2 p.m. ET release of the minutes from the last Fed policy meeting.
In the minutes, the central bankers said gross domestic product growth will decline in 2009, and that even by using non-traditional methods to try to help the economy stabilize, the outlook will remain weak for some time. The report also showed that the bankers think unemployment will rise significantly into 2010.
The day's advance extended the recent trend, with the S&P 500 now up over 8% in the last two weeks in a classic "Santa Claus" rally. After a pullback Monday, investors recharged the rally Tuesday.
"The advance is based on hope that the new administration is going to turn things around, rather than something fundamental," said Dean Barber, president at Barber Financial Group.
He said that the broad outlook hasn't changed, with the morning reports demonstrating that the economy still has a lot to work through.
"But there is so much money on the sidelines and so much money the government is promising that there's optimism a recovery could happen faster than initially thought," he said.
Technology and financials were among the leaders as investors scooped up some of last year's losers. IBM (IBM, Fortune 500), Intel (INTC, Fortune 500), Hewlett-Packard (HPQ, Fortune 500) and Cisco Systems (CSCO, Fortune 500) were the tech sector's big gainers.
Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and Morgan Stanley (MS, Fortune 500) led the financial gainers.
Economy: The number of homes under contract to be sold fell 4% in November, according to an industry trade group. The National Society of Realtors said its pending home sales index fell to 82.3 in November, worse than expected and the lowest level since the group began tracking the index in 2001.
The government's November factory orders report showed activity declined by 4.6% after dropping 6% in the previous month. Economists thought orders would drop 2.3%.
On the upside, the services sector of the economy showed some improvement in December, although activity remained weak. The Institute for Supply Management's services sector index rose to 40.6 from 37.3 in November. Economists thought it would slip to 36.5, according to a Briefing.com survey.
Company news: Toyota Motor (TM) said it will halt production at its Japanese plants for 11 days in February and March in an effort to move inventory. On Monday, Toyota reported a 37% year-over-year drop in December auto sales.
Auto sales overall were abysmal, with Ford Motor (F, Fortune 500) and General Motors (GM, Fortune 500) reporting December sales fell over 30% from a year ago.
In merger news, Endo Pharmaceuticals (ENDP) said late Monday that it will buy fellow biotech Endevus Pharmaceuticals (IDEV) for $370 million, or $4.50 per share.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by over three to one on volume of 1.33 billion shares. On the Nasdaq, advancers topped decliners by almost three to one on volume of 2.19 billion shares.
Bonds:Treasury prices rose, lowering the yield on the benchmark 10-year note to 2.45% from 2.48% late Monday. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.
Lending rates were mixed. The 3-month Libor rate slipped to 1.41% from 1.42% on Monday, a 4 1/2-year low. Overnight Libor edged up to 0.13% from 0.12% Monday. Libor is a key bank lending rate.
Other markets: In global trading, Asian markets ended mixed. European markets rallied in afternoon trading.
The dollar gained versus the euro and yen.
U.S. light crude oil for February delivery fell 23 cents to settle at $48.58 a barrel on the New York Mercantile Exchange.
COMEX gold for February delivery rose $8.20 to settle at $866 an ounce.
Gasoline prices rose 1.6 cents to a national average of $1.688 a gallon, according to a survey of credit-card swipes released Tuesday by motorist group AAA.
Talkback: Have you tried to do a mortgage work-out? Was it successful or a failure? E-mail realstories@cnnmoney.com and your story could be included in an upcoming article.
Retail Sales
Auto industry braces for more bad news
November home sales tank
Job outlook gets gloomier
