The mere discussion of more economic stimulus from the Federal Reserve was enough to help stocks end higher Tuesday after the market had swung between highs and lows.
Minutes from the Fed's latest policy meeting on Aug. 9 showed that central bank officials discussed a variety of options to bolster the economy, including buying more Treasury bonds. In the end, they decided to keep interest rates low until at least mid-2013.
The news that more aggressive action was being considered gave investors a reason to buy stocks.
"They want to see stimulus and they hope stocks will go higher," said Joseph Saluzzi, co-head of stock trading at Themis Trading.
The Federal Reserve has purchased Treasury bonds twice in the past as a way to keep long-term interest rates low. The government's second round of purchases, announced last August, helped to push the Dow up 28 percent through April 29.
Stocks were mixed for much of the day Tuesday after consumer confidence fell to the lowest level since April 2009. Trading volume was also much lighter than usual because many investors are on vacation.
The Dow Jones industrial average rose 20.70 points, or 0.18 percent, to 11,559.95. It had been down as many as 109 points earlier in the day.
Boeing Co. rose 2.3 percent after the aircraft maker said it received approval from its board to build a version of its workhorse 737 jet with a redesigned engine. That should help it compete better with rival Airbus. Caterpillar Inc. rose 2.2 percent, the most of any company in the Dow.
The Standard & Poor's 500 rose 2.84 points, or 0.23 percent, to 1,212.92. The Nasdaq composite index rose 14, or 0.55 percent, to 2,576.11.
Trading volume, or the number of shares bought and sold, was shaping up to be the lowest this year. About 2.1 billion shares exchanged hands on the New York Stock Exchange, the lowest since Dec. 31, 2010.
Low volume is worrisome because it suggests that few investors are driving the stock market's gains or losses. That creates the risk for bigger price swings, said Stephen Carl, principal and head of equity trading at The Williams Capital Group. A lack of volume also indicates that some investors don't believe that stocks are worth buying right now.
Stocks have swung widely in August. The Dow was down as much as 7.4 percent for the year on Aug. 10, but it is now up 0.1 percent. On Monday, the Dow soared 254 points, its fourth-largest gain this year. Insurers rose the most after it became clear the damage from Tropical Storm Irene wasn't nearly as bad as analysts had feared.
The Standard & Poor's 500 index hit a 2011 low Aug. 8 after the U.S. government's credit rating was downgraded for the first time. Since then, it has risen 7.7 percent.
Bond prices have been just as volatile. The yield on the 10-year Treasury note briefly fell to a record low below 2 percent on Aug. 18 on weak manufacturing data from the Philadelphia Federal Reserve. On Tuesday, the yield fell to 2.18 percent, down from 2.27 percent late Monday.