US stocks have mostly risen, lifted by upbeat economic data and hopes that a Federal Reserve meeting will deliver economic stimulus and a key German court decision will ease eurozone turmoil.
The Dow Jones Industrial Average finished at 13,323.36, up 69.07 points (0.52 per cent).
The S&P 500-stock index rose 4.48 (0.31 per cent) to 1,433.56, while the tech-rich Nasdaq lagged the broader market, adding a scant 0.51 point (0.02 per cent) at 3,104.53.
"Traders got some good news from the domestic economic front, as the trade deficit came in smaller than expected, while small business optimism improved in August," Charles Schwab & Co analysts said.
"However, sentiment was held in check by the anticipation of tomorrow's key German ruling on the eurozone permanent bailout fund and Thursday's monetary policy decision."
The Fed's Federal Open Market Committee (FOMC) opens a two-day policy meeting on Wednesday (US time) amid expectations it will take some fresh action to help the economy.
Citigroup and Morgan Stanley unveiled an agreement for Morgan Stanley to buy Citi's 14 per cent stake in their brokerage joint venture, Morgan Stanley Smith Barney Holdings, which was valued at $US13.5 billion ($A13.11 billion).
Citigroup said in a regulatory filing it would take a third-quarter after-tax charge of $US2.9 billion ($A2.82 billion) on the deal; Citi shares jumped 2.6 per cent. Morgan Stanley added 3.9 per cent.
On the 30-stock Dow, Bank of America led the gainers, up a hefty 5.2 per cent. Insurance giant Travellers Companies surged 2.5 per cent.
Kraft Foods was the biggest blue-chip decliner, down 1.1 per cent.
Apple, whose 2.6 per cent tumble weighed heavily on the markets Monday, slipped 0.3 per cent ahead of its expected announcement Wednesday of the next generation of its popular iPhone.
McDonald's shed 0.1 per cent, reversing earlier gains, after reporting a 3.7 per cent rise in global August same-store sales.
Bond prices were slightly lower. The yield on the 10-year Treasury climbed to 1.70 per cent from 1.68 per cent Monday, while the 30-year yield rose to 2.85 per cent from 2.84 per cent. Bond yields move inversely to prices.
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