Stocks jump as crude drops $3 a barrel

Broader indexes also rose Tuesday. The Standard & Poor's 500 index jumped 17.00, or 1.35 percent, to 1,277.00. The technology-dominated Nasdaq composite index, which was down for much of the session on tech earnings disappointments, ended up 24.43, or 1.07 percent, at 2,303.96.

The Russell 2000 index of smaller companies rose 19.19, or 2.75 percent, to 716.82.

The price of oil began the session mildly lower on expectations that Tropical Storm Dolly wouldn't disrupt oil operations in the Gulf of Mexico. The advance increased after comments from a Federal Reserve official sent the dollar higher against major currencies, a trend that in turn sends commodities lower.

A barrel of light, sweet crude tumbled $3.09 to settle at $127.95 on the New York Mercantile Exchange, down nearly $20 from its record high of $147.27, reached just weeks ago.

Philadelphia Federal Reserve President Charles Plosser said there could be rate hikes "sooner rather than later" even if employment and financial conditions haven't revived. Higher rates also would make some government debt less attractive, and that sent Treasury bonds sharply lower.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 4.10 percent from 4.04 percent late Monday. Government debt also weakened as investors moved into equities.

Ryan Larson, senior equity trader at Voyageur Asset Management, said the "oil prices are alleviating some fears" triggered by a number of disappointing earnings reports. So far, the growth rate of Standard & Poor's 500 index companies reporting has fallen to negative 14.7 percent, according to Thomson Financial.

"Lower oil prices are diverting attention from earnings for the moment," Larson said. "There's no questions about some negative earnings reports coming out, but we're starting to think some of them might be company specific and not broader."

Investors will get more data with some 158 members of the S&P 500 expected to report this week, the busiest since second-quarter earnings season began earlier this month.

Earnings reports released in the past few days showed some indications that consumers--responsible for more than two-thirds of U.S. economic activity--are scaling back on purchases. American Express, whose credit cards cater to more affluent customers, missed projections after setting aside more money to cover souring loans across all its portfolios. The stock fell $2.91, or 7.1 percent, to $37.99.