U.S. equity markets rebounded strongly overnight from the prior day's losses amid optimism the Federal Reserve will stimulate the economy.
Equities rose after Federal Reserve Bank of Chicago President Charles Evans said he would support measures to generate faster job growth.
By the close the Dow Jones had jumped 163 points to 12,574, while the NASDAQ rallied 33 points to 2843.
Fitch Ratings downgraded 18 Spanish banks Tuesday. The move comes less than a week after the agency cut the country's sovereign debt rating. Fitch, which already cut Santander and BBVA on Monday, cut the ratings for CaixaBank, Bankia, Banco Popular Espanol and others.
German chancellor Angela Merkel said today that Europe’s heavily indebted nations must push ahead with structural reforms to put their economics back in order, rather than relying on government spending.
Merkel also reiterated her opposition to so-called eurobonds as a short term fix to the Europe's debt crisis.
Over the weekend, Spain asked for up to $125 billion in rescue loans from eurozone members to help shore up its banks.
Merkel stressed that the country's government will need to meet the conditions for the bailout, which are said to not be as extensive as those for Greece and Porugal - which needed much greater funds.
Investors are also nervous as Greece elections take place Sunday. Traders are concerned that anti-austerity parties will be voted in, throwing in jeopardy the country’s future in the eurozone and the bailout agreed earlier this year.
In corporate news, Michael Kors Holdings (NYSE:KORS) said Tuesday that fiscal fourth-quarter profits more than doubled as the fashion label forecast higher sales and net income in the current fiscal year.
Adjusted profit for the period totaled 21 cents. Revenue rose to $380 million from $240 million. Wall Street analysts expected Michael Kors to earn 16 cents per share on revenue of $361 million, according to FactSet Research.
Financial information provider FactSet Research (NYSE:FDS) Tuesday said fiscal third-quarter earnings were up 11 percent as revenues from subscriptions grew.
First Solar (NASDAQ:FSLR) was up 18% after the maker of thin-film panels said it has entered into a pact to build two large projects in Australia as part of its global expansion.
Apple (NASDAQ:AAPL) shares were slightly higher Tuesday after dropping Monday - the day of its developer's conference. The announcement of the new MacBook Air and other products wasn't enough to pull it from a recent slump.
Zynga (NASDAQ:ZNGA) stock fell 12% Tuesday as a comScore survey showed slowing user growth in the U.S. for Facebook (NASDAQ:FB).
Zynga depends on Facebook for the majority of its revenue as most of the online-gaming company’s traffic comes from its games being played via Facebook.
On the economic front, the US Labor Department import prices dropped by an expected 1.0% in May, and were down 0.3% on a year-on-year basis.
May was the first decline in import prices since October 2011 and the largest since June 2010.
The U.S. government ran a budget deficit of $125 billion in May, the Treasury Department said Tuesday, pushing the deficit to $844 billion for the first eight months of fiscal 2012.
In its monthly budget statement, the Treasury said the government spent $305 billion in May, 31% above the year-ago period. Receipts rose 3%, to $181 billion, the second-highest amount on record for May.
On the NYMEX, crude futures for July delivery gained 65 cents to $83.33 a barrel while gold futures for August delivery gained $20.30 to $1,616.70 an ounce.
European stocks closed higher with the FTSE 100 up 0.8%, the DAX gained 0.3% and the CAC 40 edged 0.1% higher.
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