US Markets

The Dow Jones Industrial Average notched its biggest point gain of the year as investors cheered International Business Machines' strong earnings and President Barack Obama's praise for the $3.7 trillion deficit-reduction plan. The blue-chip Dow closed up 202.26 points, or 1.63%, at 12587.42 Tuesday, its biggest point gain since December 2010. IBM closed at a record high, rising $9.93, or 5.7%, to 185.21, after the technology company reported growth in all of its major businesses in the second quarter.

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IBM alone accounted for 75 points of the Dow's gains. The Dow, which registered triple-digit point gains for much of the session, traded significantly higher after support for a deficit-reduction plan came out of a bipartisan Senate group. The president said the proposal, which would modify entitlement programs like Social Security and rework the tax code, represents a very significant step forward in deficit talks. Investors were already in a positive mood thanks to encouraging earnings and a hint of housing optimism. IBM's results showed strength in its hardware, software and services businesses, prompting the company to boost its full-year earnings outlook. That lifted tech stocks and pushed the tech-heavy Nasdaq Composite up 61.41 points, or 2.22%, to 2826.52. The Standard & Poor's 500-stock index rallied 21.29 points, or 1.63%, to 1326.73. Technology was the best performing sector in the S&P 500, up 2.7% on the day.

European Markets

European stock markets rose Tuesday as solid results from Novartis AG, a rebound for bank stocks and gains for technology companies helped the region's main indexes recover some of the previous session's heavy losses. The Stoxx Europe 600 index gained 0.8% to end at 264.28. Bank stocks rallied, with ING Group NV up 5.2% and Nordea Bank AB up 5.7%. Italy's UniCredit SpA and Intesa Sanpaolo SpA rose 4.7% and 4.3% respectively, helping lift the FTSE MIB index 1.9% to 18,229.47.

Bank stocks were also the strongest gainers on most other markets, with Societe Generale SA up 4.4% in Paris and Lloyds Banking Group PLC up 4.3% in London. The moves came as yields on Italian- and Spanish-government bonds retreated amid hopes of progress at a meeting of euro-zone leaders Thursday. Reuters reported that three options for getting the private sector involved in a fresh Greek bailout have been discussed, including one that might avoid a selective default rating for Greek debt. Separately, Ewald Nowotny, governor of Austria's central bank and a member of the European Central Bank's governing council, suggested that a Greek rescue could involve a short-term default. In previous talks, the ECB has staunchly opposed any form of default, so a potential softening of its approach could help authorities reach a deal on a new Greek bailout.

Traders likely don't want to have open short positions going into Thursday's meeting because the expectation is that European leaders will agree on some sort of deal on Greece, which could drive a short-term rally, he noted. Technology companies were also some of the strongest performers Tuesday following results from International Business Machines Corp. late Monday. IBM reported an 8% rise in profit as both hardware and software sales at the technology company rose sharply. Software AG rose 7.1%, while chip maker Infineon Technologies AG rose 4.8%, buoying the German DAX 30 index which closed 1.2% higher at 7,192.67. In Paris, telecom-equipment firm Alcatel-Lucent rallied 5.9% and was the top gainer in the CAC 40 index, which rose 1.2% to 3,694.95. In the U.K., the FTSE 100 index rose 0.7% to 5,789.99, led by bank stocks.

Asian Markets

Asian markets were mostly lower Tuesday as debt jitters in Europe and the U.S. kept investors cautious while utilities and exporters dragged the Tokyo market lower. The U.S. Treasury Department says it will be unable to meet all obligations after Aug. 2 if Congress doesn't vote to raise the legally mandated borrowing limit, but a political deal to accomplish that remained elusive Monday.

Tensions also prevailed in Europe ahead of a meeting Thursday at which euro-zone leaders are due to complete a bailout package for Greece an effort to contain the region's debt crisis. Japan's Nikkei Stock Average was among the day's biggest losers, dropping 0.9% to 9889.72 as traders returned after a holiday-extended weekend. China's Shanghai Composite dropped 0.7% to 2796.98, Taiwan's Taiex shed 0.2% to 8524.57 and South Korea's Kospi ended little changed at 2130.21. But Hong Kong's Hang Seng Index gained, bouncing off early declines to finish 0.5% higher at 21902.40.

Japanese exporters suffered further from a strong local currency. Sony fell 2.5%, Nintendo was down 2.7%, and auto maker Honda Motor fell 2%. Utilities also performed poorly, with Kansai Electric Power falling 3.3% after the company halted operations at one of its nuclear reactors in Fukui Prefecture, western Japan, due to a problem with the emergency core-cooling system. Regional gold miners climbed after the metal's price topped the $1,600-a-troy ounce milestone Monday. Zijin Mining Group rose 2.3% in Hong Kong and 1% in Shanghai.

Base Metals

Copper closed 1.5% higher on the London Metal Exchange Tuesday as base metals gained on a firm euro and strong U.S. housing data, but zinc was the star performer of the day, rising more than 2.4%. Base metals rallied throughout the day as risk sentiment improved across world financial markets, with investors more optimistic about a Greek financing deal being reached at Thursday's emergency summit of euro-zone leaders.This boosted the euro against the greenback and helped equity markets recover some recent losses as well. Industrial metal prices also benefited from better-than-expected housing data from the Commerce Department, which showed U.S. home construction rose to the highest level in five months in June. LME three-month copper finished the PM kerb at $9,840 a metric ton, up $146 on Monday's afternoon close. Three-month zinc meanwhile rose $59 to $2,490/ton.

Oil futures finished higher Tuesday after Europe appeared closer to resolving its debt crisis and a report on U.S. housing starts came in better than expected. Light, sweet crude for August delivery settled up $1.57, or 1.6%, at $97.50 a barrel on the New York Mercantile Exchange. September Brent crude on the ICE futures exchange traded up $1.26, or 1.1%, at $117.31 a barrel. Gold futures pulled back slightly as traders viewed a pause in rising worries about U.S. and European debt as an opportunity to cash out after the market's moves to record highs. Futures had touched a record high at $1,610.70 a troy ounce early in the session.

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