By msnbc.com news services
Stocks closed an abbreviated session higher Tuesday, as sharp gains in oil prices lifted energy shares and a rise in the euro currency pointed to a less risk-averse environment.
The U.S. stock market closed early at 1:00 p.m. ET ahead of the Independence Day holiday, and will be closed on July 4.
A raft of weak data has raised expectations that the European Central Bank will cut interest rates to a record low on Thursday, when U.S. traders return from the July 4 holiday, in a move that could drive stock markets higher.
Eric Kuby, chief investment officer, North Star Investment Management in Chicago, said that last week's European summit, which sparked the rally with measures to ease the bloc's crisis, has raised expectations that policymakers globally are waking up to the need to support financial markets and the economy.
"We have been in rally mode," he said. "It's hard to buy into the actual economic numbers as really moving the market as they seem to be so dwarfed by the this whole global liquidity situation."
Brent crude oil topped $101 a barrel for the first time in three weeks as tension over Iran increased concerns about threats to supply and as investors bet on further policy action.
The euro continued to rally in late morning in New York, climbing to a session peak in thin liquidity as investors positioned for the European Central Bank policy meeting.
Major automakers also posted stronger-than-expected sales gains in June.
The S&P 500 has gained 3.3 percent over the last 3 sessions -- its best such runs since December. The move has lifted the S&P 500 out of a recent trading range from 1,350-1,360, identified by analysts Brown Brothers Harriman.
Microsoft Corp shares were flat after the company admitted its purchase of aQuantive, its largest acquisition in the Internet sector, was effectively worthless and wiped out any profit for the last quarter.
The Commerce Department said new orders for manufactured goods rose 0.7 percent during May. Economists had forecast orders rising 0.2 percent.
A U.S. ISM manufacturing report on Monday, whose main index registered a contraction in the sector for the first time since July 2009, boosted speculation that the Federal Reserve will announce it will embark on a third round of asset purchases, known as 'QE3', perhaps as soon as the central bank's next policy meeting from July 31 to August 1.
The U.S. Justice Department is probing Chesapeake Energy Corp and Encana Corp for possible collusion after a Reuters report showed that top executives of the two rivals plotted in 2010 to avoid bidding against each other in Michigan land deals, a source close to the probe said.
Reuters contributed to this report.
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