Stocks Rally as Traders Overcome Euro Jitters

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The Dow posted triple-digit gains on Tuesday afternoon as traders paid close attention to developments in Europe.

Today's Markets

As of 3:20 p.m. ET, the Dow Jones Industrial Average climbed 109 points, or 0.87%, to 12520, the S&P 500 rose 8.9 points, or 0.69%, to 1318 and the Nasdaq Composite gained 19.6 points, or 0.7%, to 2829.

In a stark contrast to the prior session in which the markets fell more than 1%, traders were making more bullish bets on the day. The materials, financial and industrial sectors, that are seen as especially sensitive to the world's economic fluctuations, posted the biggest gains by a wide margin. Meanwhile, defensive sectors like utilities, health care and consumer staples lagged behind the broader markets.

The yield on U.S. Treasury bonds rose as traders moved out of the safe-haven asset class. The 10-year yield climbed 0.044-percentage point to 1.634%. Still, traders were keeping a close eye on the unfolding situation in Europe.

A $125 billion deal to recapitalize Spanish banks proved insufficient to keep the country's borrowing costs from rising to painful levels. They remained elevated on Tuesday, with the benchmark 10-year note yielding 6.8%, matching a euro-era high. The price of insuring Spanish debt against a default also lurched to yet another record high, according to London-based financial data firm Markit.

Italian yields also remained well above the 6% level, causing fears that either country could lose access to borrowing on private markets. The Greek election that is likely to seal the country's fate in the eurozone is also set to take place on Sunday. As a result, many trades said they remained cautious to make big bets with so much potential volatility on the horizon.

On the economic front, a report from the Labor Department showed U.S. import prices fell 1% in May as expected, while export prices fell by 0.4%, more than the 0.1% decline expected. Both are forecast to have cooled down over the month of May. Later in the day, the Treasury Department is set to release the Federal Budget for May.

Energy futures were little changed after sustaining heavy losses in the last session. The benchmark crude oil contract traded in New York gained 62 cents, or 0.75%, to $83.32 a barrel. Wholesale New York Harbor gasoline slipped 0.24% to $2.65 a gallon.

In metals, gold climbed $17.00, or 1.1%, to $1,614 a troy ounce.

Foreign Markets

The Euro Stoxx 50 rose 0.27% to 2143, the English FTSE 100 gained 0.76% to 5474 and the German DAX climbed 0.33% to 6161.

In Asia, the Japanese Nikkei 225 sold off by 1% to 8537 and the Chinese Hang Seng edged lower by 0.43% to 18873.