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About halfway through the trading day, the Dow Jones industrial average (INDU) was up 132 points, or 1.1%, to sit above 12,000. The index crossed that threshold last Wednesday for the first time since June 2008, but has still not managed to close above it.

All but 2 of the 30 blue-chip components moved higher. A 5.8% jump in shares of Pfizer (PFE, Fortune 500) led the advance. The drugmaker posted better-than-expected fourth-quarter earnings. Alcoa (AA, Fortune 500) and Bank of America (BAC, Fortune 500) were also big Dow gainers.

Much stronger-than-expected manufacturing data added fuel to the buying spree.

"Economic data remains fairly positive and quarterly earnings are coming out strong across the board," said Rob Lutts, chief investment officer at Cabot Money Management. "Those are having a big impact and driving expectations higher."

U.S. stocks posted solid gains Monday and ended January about 2% higher, as positive earnings from Exxon Mobil (XOM, Fortune 500) and rising commodity prices overshadowed the political unrest in Egypt. The Dow finished the month 2.7% higher, representing the first January gain since 2007, and the best first-month performance since 1997.

Economy: Construction spending dropped 2.5% in December, following a rise of 0.4% in November. Economists were expecting spending to ease 0.4% during the month.

General Motors (GM) kicked off the year with stronger-than-expected sales in January, driven by increased demand from individual customers. GM stock was slightly higher.

In Washington, the Senate Budget Committee kicked off three days of hearings on the economic outlook, tax reform and challenges to the economic recovery.

Jobs back but pay stinks
At the end of the week, the government releases its January jobs report, and investors will be eyeing the report closely for signs of improvement in the labor market.

Companies: Before the opening bell, United Parcel Service (UPS, Fortune 500) logged a 44% jump in profit that beat forecasts and said it expects earnings per share to climb to a record high for 2011. Shares of the package delivery company were up 4.4%.

World markets: Protests in Egypt resumed Tuesday and tensions were still far from resolved, with Standard & Poor's announcing it cut Egypt's foreign currency rating. The news came a day after Moody's downgraded its rating on Egypt's debt.

But some investors think the fears that sparked a sell-off in the stock market late last week may have been overblown.

"Investors are realizing that while there are still issues in Egypt and across the Middle East, they will likely be resolved," Lutts said. "For now, we're gravitating back to the reality that the U.S. economy is recovering."

European stocks gained Tuesday. Britain's FTSE 100 and France's CAC 40 rallied 1.6%, and the DAX in Germany rose 1.4%.

Asian markets ended higher. The Shanghai Composite edged up 0.3%, the Hang Seng in Hong Kong gained 0.2% and Japan's Nikkei rose 0.4%.

Currencies and commodities: The dollar slumped against the euro, the Japanese yen and the British pound.

Oil threat in Egypt may be overblown
Oil for March delivery slipped 22 cents to $91.97 a barrel. On Monday, crude prices jumped to their highest level since October 2008, gaining 2.9% to settle at $92.19 a barrel, amid worries about potential disruptions to shipments through the Egypt-controlled Suez Canal.

Gold futures for April delivery gained $2.20 to $1,336.70 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury fell, pushing the yield up to 3.44% from 3.35% late Friday.

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