| NEW YORK
NEW YORK Stocks rose for the fourth session in a row on Tuesday as investors bet that companies will be able to surpass the low bar set for earnings season, leaving room for better-than-expected results that could drive the rally further.
The push higher in recent days has taken the benchmark S&P 500 to 1 percent below its all-time closing high of 1,669.16 reached on May 21.
The gains also suggest that investors are becoming more comfortable with the prospect of the Federal Reserve slowing the pace of its economic stimulus, which has been a major driver of the equity rally this year.
FedEx Corp (FDX.N) climbed on speculation that billionaire William Ackman would make a big investment in the company. FedEx shot up 4.4 percent to $103.15, its highest close since mid-March.
Nine of the 10 S&P 500 industry sector indexes ended higher. Material and industrial shares recorded the biggest gains after Alcoa Inc (AA.N) affirmed its global demand forecast for aluminum products when it reported results after Monday's closing bell. Alcoa's release is traditionally viewed as the unofficial start to earnings season.
For the most part, analysts are expecting second-quarter results to be soft with weak sales, but expectations are for a pickup later in the year. Even so, investors are starting to think earnings expectations may have been ratcheted down too low.
"We think we have the potential once again for an earnings season where expectations are a little too low, and when the earnings finally do come out, we could have a little bit of an upside surprise," said Ryan Detrick, senior technical strategist at Schaeffer's Investment Research in Cincinnati.
Analysts expect S&P 500 companies' earnings to grow 2.9 percent in the second quarter from a year ago, well below the 6.1 percent that was forecast in April, according to Thomson Reuters data.
Forecasts for growth in the first quarter were similarly revised lower to as little as 1.5 percent. The earnings season ended up beating that with growth of 5.4 percent.
The Dow Jones industrial average .DJI gained 75.65 points, or 0.50 percent, to end at 15,300.34. The Standard & Poor's 500 Index .SPX rose 11.86 points, or 0.72 percent, to 1,652.32, the highest close since the end of May. The Nasdaq Composite Index .IXIC climbed 19.43 points, or 0.56 percent, to close at 3,504.26.
Alcoa reported adjusted profit and revenue above Wall Street forecasts after Monday's closing bell. Still, its stock dipped 0.1 percent to $7.91. In contrast, the S&P materials sector index .SPLRCM jumped 1.6 percent. The S&P industrials index .SPLRCI climbed 1.5 percent.
"(Analysts) have lowered the expectations enough that even if the numbers aren't materially better, the outlooks will be more favorable than what is the consensus now," said Alan Lancz, president of Alan B. Lancz & Associates Inc in Toledo, Ohio.
"If Alcoa can do it with their clouds hanging over them, then these other sectors should have a lot of room to beat expectations and please investors."
The earnings calendar remains light until Friday when JPMorgan Chase (JPM.N) and Wells Fargo (WFC.N) are set to report results.
Volatility has plunged in recent weeks on waning fears about imminent reductions in the Federal Reserve's $85 billion a month of bond purchases. The Market Volatility Index .VIX, Wall Street's favorite barometer of investor fear, has tumbled more than 30 percent since late June. On Tuesday, the VIX fell 2.9 percent to end at 14.35.
"It almost seems like the market is starting to get more comfortable with the fact that the Fed could taper," Detrick said.
"We're in a different area from where we would have been five or six weeks ago, where strong economic data was met with selling. Now good news is actually being perceived as good news."
The Fed will release the minutes from its June policy meeting on Wednesday. Investors will watch for clues into the timing of possible trimming of stimulus measures.
Last month, Fed Chairman Ben Bernanke said the economy is expanding strongly enough for the central bank to start slowing the pace of its bond-buying stimulus later this year.
In the health-care sector, Health Management Associates Inc HMA.N has attracted takeover interest from Community Health Systems Inc (CYH.N) and other rivals about buying the hospital operator, sources said. Shares of Health Management surged 8.3 percent to $16.75.
Intuitive Surgical (ISRG.O) shares slid 16.2 percent to $419.30 after the maker of the Da Vinci surgical robot said on Monday it expects second-quarter revenue below analysts' expectations.
Volume was roughly 5.8 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE MKT, below the year-to-date average daily closing volume of 6.4 billion.
Advancers outnumbered decliners on the NYSE by a ratio of nearly 3 to 1. Advancers also had the upper hand on the Nasdaq, with three stocks gaining for nearly every two that fell.
(Editing by Jan Paschal)