Ending its worst stretch in more than two months, the Dow climbed more than 80 points on Tuesday as economic worries eased amid an upbeat outlook from Home Depot and earnings beats from other retailers like Target.

Today's Markets

The Dow Jones Industrial Average rose 82.60 points, or 0.90%, to 9217.94, the Standard & Poor's 500 added 9.94 points, or 1.01%, to 989.67 and the Nasdaq Composite picked up 25.08 points, or 1.30%, to 1955.92. The consumer-friendly FOX 50 gained 6.19 points, or 0.86%, to 722.20.

After two days of bearish sentiment and worries about the timing and strength of a possible economic recovery, the bulls reestablished themselves Tuesday, pushing the markets solidly higher and crude oil to its best day in almost three weeks.

“Clearly the tone is a lot better than we had yesterday. Down 180 points yesterday, it looked like all the bears were right,” NYSE trader Ted Weisberg of Seaport Securities told FOX Business.

Wall Street rallied around Home Depot's (HD) upgraded earnings guidance and better-than-expected results from discounter Target (TGT), T.J. Maxx parent TJX (TJX) and luxury retailer Saks (SKS). At the same time, the markets benefited from the latest tame inflation report and shrugged off a surprise drop in housing starts in July.

The Dow was led higher by American Express (AXP), Alcoa (AA) and Home Depot. The biggest laggards on the blue-chip index were Boeing (BA) and defensive stocks like Wal-Mart (WMT) and Coca-Cola (KO). 

The Nasdaq Composite enjoyed a stronger rally than the broader markets as tech stocks like BlackBerry maker Research in Motion (RIMM) and Nvidia (NVDA) rose sharply ahead of Hewlett-Packard's (HPQ) quarterly results. 

Thursday's solid rally comes after economic fears sent the Dow plummeting 263 points in just two days, its worst slump since June 16. After rallying for four straight weeks, stocks have come under pressure in August as data on retail sales and consumer sentiment have given the bulls pause. 

“Investors have been conditioned over the last six months to buy the dip,” said Paul Nolte, director of investments at Hinsdale Associates, who said he is still worried about the economy. “When you look at the economic data underlying this, it’s still not fabulous.”

Retail stocks helped lead the markets higher on the earnings beats. Sears (SHLD) and Big Lots (BIG) rose sharply and Target jumped almost 8% on more than double its average daily volume. 

The retail rally began with home improvement king Home Depot, which beat the Street with an adjusted profit of 64 cents per share even as its net income tumbled 7.2%. While Home Depot’s revenue fell by a worse-than-expected 9.1%, the company raised its full-year earnings outlook and exceeded weak results from rival Lowe’s (LOW) a day ago.

At the same time, Target easily exceeded expectations with a second-quarter profit of 79 cents per share, 13 cents higher than estimates. Target’s revenue fell to $15.07 billion, missing analysts’ forecasts.

“Eventually we’re going to run out of those better-than-expected numbers and then it’s going to become a problem," said Weisberg. 

On the economic front, the Commerce Department said total housing starts fell 1% in July, missing economists’ forecast for a rise of 2.7%. The figures represent a drop-off from previous months as housing starts climbed 6.5% in June and soared 15% in May. Shares of home builders like KB Home (KBH) and Toll Brothers (TOL) closed sharply higher.

Meanwhile, the Labor Department released new data that continues to suggest inflation remains tame. Producer prices fell 0.9% in July from the month before and 6.8% from a year ago. Economists predicted PPI would fall 0.4% month-over-month. Core prices fell by an in-line 0.1%.

In the commodity markets, crude oil ended its two-day slide by soaring along with the equities markets. Crude settled at $69.19 a barrel after rallying $2.44, or 3.66% -- its best daily performance since July 31. The higher oil prices helped lift shares of energy stocks like Sunoco (SUN) and Chevron (CVX). 

Corporate Movers

General Motors unveiled plans to boost its production by 60,000 vehicles and reinstate 1,350 jobs to meet demand. GM said August will be its best sales month of the year, beating forecast by at least 60,000 vehicles. The auto maker also reached a deal to sell its Saab unit to luxury car maker Koenigsegg Group.

Hewlett-Packard (HPQ) is mulling the sale or shut down of parts of its outsourcing business a year after buying Electronic Data Systems for $13 billion, Reuters reported. The potential move could affect the tech giant’s business process outsourcing arm.

JPMorgan Chase (JPM) has agreed to provide California a short-term loan of $1.5 billion to allow the state to end its IOU program, the Los Angeles Times reported. The interest rate hasn’t been determined yet, the paper reported, but experts said it could be between 2% and 3%.

Pulte Homes's (PHM) buyout of rival Centex (CTX) was “overwhelmingly” approved by shareholders of each company, clearing the way for the creation of the world’s largest home builder. Pulte CEO Richard Dugas will become the combined company’s chairman and CEO.

Saks (SKS) said its loss widened during the second quarter as same-store sales plunged 15.5%. However, company’s loss of 39 cents per share was well above expectations. Saks said its net sales tumbled 15% to $561.69 million, just shy of the $563.64 million analysts had expected.

TJX (TJX) beat the Street with a quarterly profit of 61 cents per share but the parent of T.J. Maxx and Marshalls saw its shares fall on a weak outlook for the fourth quarter.

Toyota Motor (TM) is considering closing a California assembly plant it co-owns with the General Motors' legacy assets that remain in bankruptcy, The Wall Street Journal reported. The closure is not imminent, the paper reported, because of hundreds of millions of dollars in unresolved costs, but Toyota is working with "old" GM to see how to walk away. 

Cardinal Health (CAH) saw its shares climb 2% after the drug wholesaler upgraded its full-year earnings guidance despite a 14% drop in second-quarter net income. Cardinals’s non-GAAP EPS of 86 cents per share matched the Street’s view and its revenue rose by a better-than-expected 10% to $25.2 billion.

Global Markets

European markets also rebounded from their two-day slide. London's FTSE 100 rose 0.88% to 4685.78, Frances' CAC 40 gained 0.91% to 3450.69 and Germany's DAX climbed 0.94% to 5250.74. 

In Asia, Japan's Nikkei 225 advanced 0.16% to 10284.96, Hong Kong's Hang Seng jumped 0.84% to 5217.36 and China's Shanghai Composite added 1.4% to 2910.88.