Johnson & Johnson led the Dow Jones industrial average higher on Tuesday as stocks ended slightly higher. The health-care heavyweight rose 3 percent after reporting earnings that beat Wall Street's expectations. The company also raised its full-year earnings forecast.
Stocks traded in a narrow range. Other companies reported weak results and worries lingered over a warning from Standard & Poor's about U.S. government debt.
Zions Bancorporation rose 6 percent, the most of any company in the Standard & Poor's 500 index. The Utah bank reported a first-quarter profit after posting a loss a year ago. It also said customers were getting better at paying back loans, allowing the bank to set aside less money to cover defaults.
According to preliminary calculations, the Dow Jones industrial average rose 65.16 points, or 0.53 percent, to 12,266.75. The Standard & Poor's 500 rose 7.48, or 0.57 percent, to 1,312.62. The Nasdaq composite rose 9.59, or 0.35 percent, to 2,744.97.
Major stock indexes posted their largest one-day drop in over a month Monday after S&P said it might lower its rating on U.S. government bonds if Washington failed to tackle its mounting debts. While the ratings agency kept its U.S. debt rating at AAA, the highest possible, it warned that there was a one-in-three chance it would downgrade U.S. debt within two years.
U.S. government bonds fared well despite the S&P warning. Bond prices moved higher Monday and again on Tuesday, lowering their yields. Economists and bond traders offered a handful of explanations. If S&P's warning prods Congress and the Obama administration to cut budget deficits sooner, it would likely lead to lower economic growth, leading traders to buy bonds.
"If it serves as a catalyst (for long-term debt reduction) then that's a good thing for Treasurys," said George Goncalves, head of U.S. rates strategy at Nomura Securities.
A slower economy would also lead the Federal Reserve to postpone any increases in interest rates, Goldman Sachs economists said in a note to clients. That would be another positive for bonds.
Goncalves said bond traders were more likely to worry about more immediate problems such as the looming fight in Congress over raising the federal debt limit, not the threat of a downgrade from S&P in 2013. "That's so far down the road," he said. "In this market, two years is an eternity."
The Commerce Department reported that builders broke ground in March on more new homes than analysts expected. Home construction rose 7.2 percent from February.
United States Steel Corp. rose 4 percent after announcing the sale of its 841-foot U.S. Steel Tower, Pittsburgh's tallest building, to a New york-based investment group.
Trucking company Paccar Inc. rose 4 percent after its income and revenues beat analysts' expectations.
Harley Davidson reported its income more than tripled, but missed Wall Street estimates. The motorcycle maker's stock fell 4 percent.
Texas Instruments Inc. fell less than 1 percent. The chip-maker said late Monday that the Japanese earthquake and tsunami set its production back, reducing first-quarter income and likely cutting into second-quarter growth.
Several tech giants including Intel Corp. and IBM Corp. are scheduled report results after the end of trading.