Stocks finished in positive territory Tuesday, rebounding after Atlanta Federal Reserve President Dennis Lockhart downplayed the concern that the central bank would begin winding down its bond-buying program at its September meeting.
(Read more: Stars aligned for 'serious' US correction, analyst says)
Meanwhile, Apple spiked nearly 5 percent after billionaire investor Carl Icahn reported a "large position" in the iPhone maker via Twitter. Apple earlier hit a six-month high and broke above its 20-day moving average for the first time this year. Dow Jones reported that Icahn's Apple investment is worth over $1 billion.
On Monday, Apple rallied following a report that the company is expected to unveil its next-generation iPhone on Sept. 10.
(Read more: What could hurt Apple's stock price: Analyst)
The Dow Jones Industrial Average ended higher, propelled by Hewlett-Packard and Boeing, reversing two-straight days of declines.
The S&P 500 and the Nasdaq also finished in positive territory.
Among key S&P sectors, financials led the gainers, while telecoms declined.
(Read more: Cramer: Why I'm buying this stock today)
"We'll flop around and have a mildly choppy market for the next few days," said Keith Bliss, senior vice president at Cuttone & Co. "Overall, there are a few signs that are pointing to us that we could trade lower, but I'm not worried about a big pullback."
Atlanta Fed President Dennis Lockhart said the recent mixed economic data "do not present a clear picture" for the central bank to determine whether to taper its bond-buying program in September.
Major averages have been treading water in the last two weeks amid uncertainty about when the Fed may start winding down its stimulus program. The Fed's bond-buying policy has been credited with fueling the S&P 500's gain of nearly 20 percent so far this year.
On the economic front, retail sales edged up 0.2 percent in July, according to the Commerce Department, just below expectations for a gain of 0.3 percent.
Import prices rose less than expected in July, gaining just 0.2 percent last month, according to the Labor Department, pointing to benign inflation pressures. Economists polled by Reuters had expected prices to rebound 0.6 percent after four-straight months of declines.
Business inventories were unchanged in June. Economists polled by Reuters expected a gain of 0.2 percent.
Treasury yields jumped, with the benchmark 10-year note gaining 8 basis points to 2.699 percent.
"The story of the morning is bond yields, especially the 10-year," said Art Cashin, director of floor operations at UBS Financial Services. "As it approached 2.7 percent, it cut legs out from under opening rally attempt. Yield rise Monday afternoon followed by more pronounced rise this morning, raises fears that bond vigilantes may be taking the helm from the Fed."
The rise in interest rates hit homebuilders including KBHome, Meritage and Pulte. The iShares Dow Jones US Home Construction Index briefly dipped into negative territory for the year.
US Airways plunged after the U.S. Justice Department sued to block the airline company's merger with AMR, a deal that would create the world's largest airline. Other airlines including Delta, United Continental and JetBlue also slumped sharply following the news.
Activist investor Bill Ackman resigned from JCPenney's board after days of turmoil, saying that a deal for his exit is "the most constructive way forward" to save the retailer. He indicated to CNBC he doesn't plan to sell his shares in the company. JCPenney shares led the S&P 500 sector decliners.
Yum Brands declined after the parent company of KFC and Pizza Hut said it expects a 13 percent drop in July same-store sales in China.
Among earnings, Flowers Foods climbed after the baking company topped earnings expectations, thanks to its recent acquisitions of Lepage Bakeries and some of Sara Lee's bread brands.
Cree, Brocade and SeaWorld Entertainment are among notable companies slated to post results after the closing bell.
In Asia, the Nikkei closed 2.6 percent higher after the Nikkei newspaper reported that Prime Minister Shinzo Abe has called for a study on the impact of lowering the current corporate tax rate, as a way to attract foreign capital and boost growth.
Meanwhile, China's benchmark index, the Shanghai Composite, hit its highest level since June 20 on rising economic sentiment, Australia's S&P ASX 200 rose to its highest level in nearly three months and South Korea's Kospi hit a one-week high.
In Europe, shares were higher in morning trade after Germany's closely-watched ZEW indicator of economic sentiment came in at a highest since March. The index stood at 42.0 for August, up on 36.3 in the previous month.
—By CNBC's JeeYeon Park (Follow JeeYeon on Twitter: @JeeYeonParkCNBC)
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First published August 13 2013, 1:09 PM