The S&P 500 and Nasdaq approached record highs on Tuesday, lifted by upbeat quarterly reports from Coca-Cola and United Technologies and on optimism the United States would resolve its trade conflict with China.
Stocks extended gains late in the session after Bloomberg reported that US Trade Representative Robert Lighthizer would travel to Shanghai next week for face-to-face trade meetings with Chinese officials.
White House economic adviser Larry Kudlow told reporters on Tuesday the in-person talks to resolve the US-China trade deal were a good sign.
The US corporate earnings season is off to a strong start, with nearly 80 percent of 104 S&P 500 companies topping earnings expectations so far in the second quarter, according to Refinitiv IBES data.
Coca-Cola Co surged 6.1 percent to a record high after the drink maker beat quarterly earnings expectations and raised its full-year organic revenue forecast.
Fellow Dow component United Technologies Corp gained 1.5 percent after raising its full-year profit and sales outlook.
Also helping sentiment, US President Donald Trump and US congressional leaders reached a deal on Monday on a two-year extension of the debt limit and federal spending caps that would avert a feared government default later this year. It would, however, add to rising budget deficits.
"The reaching of a debt ceiling agreement is positive news for all sectors at large, because it's one additional question that gets removed from the outlook for growth and equities in general," said Mike Loewengart, vice president of investment strategy at E*Trade Financial in New York.
Expectations that the Federal Reserve will cut interest rates at its policy-setting meeting next week have made investors more willing to buy stocks. The S&P 500 and Nasdaq are less than half a percent below their record high closing levels set earlier this month.
The European Central Bank is expected to signal easier monetary policy when it meets on Thursday. The International Monetary Fund lowered its forecast for global growth this year and next, warning that more US-China tariffs, auto tariffs or a disorderly Brexit could slow growth further.
The Dow Jones Industrial Average rose 0.65 percent to end at 27,349.19, while the S&P 500 gained 0.68 percent to 3,005.47. The Nasdaq Composite added 0.58 percent to 8,251.40.
Investors also anticipate quarterly reports from top-tier growth companies Facebook Inc on Wednesday and Amazon.com Inc and Alphabet Inc, both on Thursday.
"If they disappoint on earnings, that could have a negative impact on (wider) share prices because they represent such a large portion of the market," said Sam Stovall, CFRA chief market strategist.
Overall profits of S&P 500 companies are expected to rise about 1 percent in the second quarter, according to Refinitiv, improving from a small decline estimated previously.
The S&P 500 industrials index rose 1.2 percent, while the materials index climbed 2.0 percent.
Shares of Travelers Companies Inc fell 1.5 percent after the insurer's second-quarter profit missed estimates. It said weather-related losses led to an 18 percent drop in underwriting gains.
Hasbro Inc surged 9.95 percent and was the biggest gainer among S&P 500 companies after the toymaker reported better-than-expected quarterly revenue.
Advancing issues outnumbered declining ones on the NYSE by a 1.86-to-1 ratio; on Nasdaq, a 1.35-to-1 ratio favored advancers.
The S&P 500 posted 24 new 52-week highs and 3 new lows; the Nasdaq Composite recorded 52 new highs and 117 new lows.Volume on US exchanges was 6.0 billion shares, compared with the 6.4 billion average for the full session over the last 20 trading days.