US stocks closed higher on Tuesday as earnings from Home Depot and retail sales data signalled solid consumer health and eased worries about a Federal Reserve that may have to become more aggressive in the face of rising inflation.
Data showed retail sales jumped 1.7 per cent in October, the largest gain since March and above the 1.4 per cent estimate, indicating Americans have begun holiday shopping early in an effort to avoid a shortage of goods amid stretched supply chains.
Retailer Home Depot Inc jumped to close at a record high and saw its biggest one-day percentage gain since April 2020 after beating quarterly sales estimates by nearly $US2 billion ($A2.7 billion) and handily topping the earnings per share view.
"This does give people a sigh of relief that the retail outlook is still pretty rosy," said Brian Jacobsen, senior investment strategist at Allspring Global Investments in Menomonee Falls, Wisconsin.
"The outlook is one where prices are rising but consumer spending is still strong and it looks like the supply chains are stressed but still we're able to get goods on the shelves."
According to preliminary data, the S&P 500 gained 17.68 points, or 0.40 per cent, to end at 4,701.44 points, while the Nasdaq Composite gained 118.68 points, or 0.75 per cent, to 15,972.52. The Dow Jones Industrial Average rose 57.34 points, or 0.16 per cent, to 36,144.79.
The S&P consumer discretionary sector jumped and was the best-performing of the 11 major S&P sectors while the S&P 500 retailing index rose to close at a record high for a second straight session.
Walmart Inc, the country's largest brick-and-mortar retailer, raised its annual sales and profit forecasts. Its shares gave up early gains, however, and fell as supply-chain woes dented margins and weighed on the consumer staples sector.
Retailers Target Corp, Macy's Inc and Kohl's Corp are set to report earnings this week.
Industrial stocks also gained after data showed US manufacturing output surged to a two-and-a-half-year high in October.
The positive data helped investors look past comments from St. Louis Federal Reserve President James Bullard, who called for a more hawkish stance by the central bank in response to rising inflation.
In contrast, San Francisco Federal Reserve Bank President Mary Daly on Tuesday called for central bank patience in the face of high inflation that, she predicted, will likely fade on its own as the pandemic recedes.
Investors have also been eyeing the possibility that President Joe Biden may pick a new head of the Federal Reserve as Chair Jerome Powell's term is set to end in February 2022, with Biden saying on Tuesday afternoon he will make a final decision in about four days.
Technology shares also moved higher, lifted in part by a gain in chipmaker Qualcomm Inc, which rose after it said German automaker BMW will use its chips in its next generation of driver-assistance and self-driving systems.
Electric-car maker Tesla Inc rose for its first advance in four sessions, even as CEO Elon Musk sold $US930 million ($A1.3 billion) in shares. The stock had tumbled more than 15 per cent last week after Musk began selling shares.
JPMorgan Chase & Co also sued Tesla for $US162.2 million ($A221 million) on ($A221.0 million) over a breach of contract related to stock warrants.