Stocks moved higher throughout much of the trading session on Tuesday, although the major averages gave back some ground going into the close. The strength in the markets came as traders used the weakness in the two previous sessions as a buying opportunity.

With the upward move seen in recent weeks, the major averages pared their losses for the first three months of the year, although they still closed lower for the quarter. While the Dow and the S&P 500 posted quarterly losses of 13.3 percent and 11.7 percent, respectively, the Nasdaq showed a more modest 3.1 percent decline for the quarter.

Robert Loest, senior portfolio manager at Integrity Mutual Funds, told RTT News that the upward move on Tuesday reflected the continuation of a bear market rally, which he said could last for another couple of weeks.

However, Loest said that he would be surprised is the rally lasted longer than that, predicting that an awful first quarter earnings season would put an end to the rally. I don't think we should look for any good news on the earnings front, he warned.

Weak economic data helped to limit the upside for the markets, with a report from Standard and Poor's showing that home prices fell at a record annual rate in January.

The report showed that the S&P/Case-Shiller 20-City Composite Home Price Index for January fell 19.0 percent compared to the same month a year ago, reflecting an acceleration from a revised 18.6 percent year-over-year decline in December.

Separately, the Institute for Supply Management - Chicago said its index of activity in the Chicago-area manufacturing sector fell to 31.4 in March from 34.2 in February, with a reading below 50 indicating a contraction in the sector.

Meanwhile, the Conference Board's consumer confidence index edged up to 26.0 in March from a record low reading of 25.3 in February, although economists had been expecting a somewhat more significant increase by the index to a reading of 28.0.

The major averages pulled back well off their highs for the session in late day trading but managed to remain firmly positive. The Dow closed up 86.90 points or 1.2 percent at 7,608.92, the Nasdaq closed up 26.79 points or 1.8 percent at 1,528.59 and the S&P 500 closed up 10.34 points or 1.3 percent at 797.87.

In overseas trading, the major stock markets in the Asia-Pacific region turned in a mixed performance on Tuesday. While Hong Kong's Hang Seng Index rose 0.9 percent, Japan's benchmark Nikkei 255 Index fell 1.5 percent.

Meanwhile, the major European markets ultimately closed near their intraday highs, well above the unchanged line. The U.K.'s FTSE 100 Index posted a gain of 4.3 percent, while the French CAC 40 Index and the German DAX Index closed up 3.2 percent and 2.4 percent, respectively.

In the bond market, treasuries ultimately closed near their highs of the day after seeing some uncertainty during the session. Subsequently, the yield on the benchmark 10-year note ended the session down 2.9 basis points at 2.685 percent.

Following the widespread weakness that was seen in the previous session, most of the major sectors bounced back to the upside Tuesday's trading.

Banking stocks led the broader markets higher for most of the session, turning in some of the market's best performances. The Kbw Bank Index ultimately closed up 7.6 percent on the day. With the gain, the index partly reversed the more than 10 percent loss that it posted on Monday.

Within the sector, State Street Corp (STT) posted a notable gain, climbing 10 percent by the end of the session. With the advance, the stock ended the session at its highest closing level in two and a half months.

Real estate and brokerage stocks also ended the session sharply higher, with the Morgan Stanley REIT Index and the Amex Securities Broker/Dealer Index closing up 8.1 percent and 5.7 percent, respectively.

While health insurance, software, and steel stocks also posted significant gains, oil service and tobacco stocks bucked the uptrend. The Philadelphia Oil Services Index ended the day down 1.8 percent, while the Amex Tobacco Index fell 1.7 percent.

In other news, the Senate Finance Committee examined the progress of the Troubled Asset Relief Program in a hearing on Tuesday, with the results of the first six months of the $700 billion financial bailout determined to have been unsteady.

The program puts taxpayers at risk for $2.9 trillion, the Special Inspector General for the TARP Neil Barofsky said at the hearing.

Additionally, General Motors (GM) and Ford (F) announced new rounds of incentives, including payment protection for job losers, to boost customer confidence and jump-start vehicle sales.

GM unveiled its GM Total Confidence plan, whereby customers can get payment protection for the first 24 months of ownership. Meanwhile, Ford launched its new Ford Advantage Plan, under which Ford will provide 12 months of payment protection.

Economic data is likely to attract some attention on Wednesday, with several key reports due to be released. Traders may particularly close attention to the ADP employment report, looking for indications of the strength of the Labor Department's monthly employment report.

Reports on manufacturing activity, construction spending, and pending home sales could also have a notable impact on trading.

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