The Dow Jones Industrial Average rose 366.58 points, or 1.06 percent, to 34,951.93. The S&P 500 added 32.19 points, or 0.71 percent, to 4,554.98. The Nasdaq Composite Index increased 108.69 points, or 0.76 percent, to 14,353.64.
Eight of the 11 primary S&P 500 sectors ended in green, with technology and financials leading the gainers by rising 1.26 percent and 1.12 percent, respectively. Meanwhile, real estate and utilities led the laggards by losing 0.82 percent and 0.78 percent, respectively.
U.S. stocks finished higher on Tuesday as the second-quarter earnings season rolled in. Traders were digesting better-than-expected corporate earnings, with more large banks reporting encouraging results.
Morgan Stanley, Bank of America and Bank of New York Mellon all reported better-than-expected earnings on Tuesday, with a revival in investment banking and higher interest rates boosting profits in the second quarter. The three stocks surged 6.45 percent, 4.42 percent and 4.11 percent, respectively.
Meanwhile, shares of Microsoft advanced toward a record close after the tech giant set higher prices on its artificial intelligence (AI) related software. Its stock jumped 4 percent on Tuesday, helping the Dow hit a 15-month high.
The U.S. second-quarter earnings season came this week against the backdrop of a more resilient economy than many expected. In particular, the job market has remained healthy, supporting consumer spending, which has also benefited from excess cash on household balance sheets and slowly rising real incomes as inflation cools, according to an analysis published by UBS Global Wealth Management on Tuesday.
"As a result, U.S. economic data has consistently beaten expectations over the last several months, and we think the second-quarter earnings season is likely to reflect this trend," said UBS.
"Wall Street was also buoyed by Morgan Stanley and Bank of America results which gave investors some further cause for optimism early in earnings season. Of course, this is just one hurdle cleared but investors will be hoping it's a sign of things to come," said Craig Erlam, senior market analyst at OANDA, a supplier of online multi-asset trading services.
Investors were also digesting the latest economic data released on Tuesday.
The U.S. Census Bureau reported that retail sales rose 0.2 percent month-over-month in June, lower than market expectations of 0.5 percent, suggesting that consumers are more thoughtful with their purchases. Data for May was revised up to 0.5 percent from 0.3 percent.
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