After Wall Street got hit with steep losses Monday, speculation increased that the Federal Reserve might step in with an emergency rate cut -- talk that helped lift stocks overseas.
"Stocks [are] recovering on a perception the FOMC report will be hawkish. Very tough to buy these levels, but credit still running the show," said Tom DiGaloma, head of U.S. Treasury trading at Jefferies & Co.
Minutes from the Federal Open Market Committee's Oct. 30-31 meeting on monetary policy are due for release at 2 p.m. Eastern.
After climbing as much as 150 points, the Dow Jones Industrial Average was recently up 87.8 points, or 0.7%, at 13,046.2.
Of the Dow's 30 components 22 were ahead, led by Exxon Mobil Corp. , up 4.2% amid a rebound in energy stocks. .
On the New York Mercantile Exchange, crude-oil futures for January delivery were recently up $2.18 to $96.82 a barrel. .
Blue-chip technology shares also scored solid gains, with International Business Machines Corp. up 1.5% and Intel Corp. rising 1.8%.
Computer bellwether Hewlett-Packard reported a stronger-than-forecast 28% profit rise late Monday, as well as forecasting current-quarter earnings ahead of Wall Street estimates, also helping lift the Dow. .
Shares of Hewlett-Packard gained 0.9%.
Tempering the good cheer earlier on was Freddie Mac's sizable quarterly loss and a drop in U.S. building permits.
The Commerce Department estimated a 3% rise in U.S. housing starts for October, but building permits fell for the fifth consecutive month, down 6.6%, and stood at their slowest pace in 14 years.
The S&P 500 rose 11.36 points, or 0.8%, to 1,444.63, while the Nasdaq Composite advanced 27.38 points, or 1.1%, to 2,620.76.
On the New York Stock Exchange, volume topped 626 million shares, and advancing stocks outpaced decliners nearly 2 to 1. On the Nasdaq, 878 million shares changed hands, with advancers beat out thise declining by an 8-to-5 margin.
Also on the Nymex, gold futures rose sharply, as the euro's rise to a record high against the dollar boosted demand for the precious metal, with the spot-month up $17 to $795 an ounce. .
As for currencies, the dollar was lower almost across the board, probing new lows against the euro but gaining on Japan's yen as stronger equities helped vanquish risk aversion. The dollar index stood at 75.355, down from 75.785 late Monday. .
In the bond market, Treasurys were mostly lower, sending yields higher, as investors left the safe haven of government bonds for equities.
In recent action, the benchmark 10-year Treasury note fell 9/32 to 101 6/32, its yield up to 4.104%. .
Shares of Freddie Mac fell 25.8% after the U.S. mortgage lender reported a $2 billion quarterly loss and said it might slash its fourth-quarter dividend.
Freddie Mac's quarterly losses "show you're probably going to have more bodies fall out of the closet in the financial area," said Jim Awad of W.P. Stewart Asset Management. .
Fellow mortgage investor Fannie Mae also came under selling pressure.
Other stocks trading actively included discount retailer Target , which approved a $10 billion buyback while reporting a drop in third-quarter profit.
Target's stock fell 1.8%.
Also among the retailers, Nordstrom Inc. expanded its share-buyback plan to $2.5 billion and reported a 22% rise in profit. The high-end retailer's stock soared 14.2%.
In Europe, shares moved higher in a volatile session as investors bought up the equities of hard-hit companies. .
And Asian indexes ended mixed overnight, with several markets sharply higher on unconfirmed talk related to possible interest-rate uts by the Fed. .
By Kate Gibson