NEW YORK (CNN/Money) - U.S. stock markets rallied to a higher close Tuesday, with the Nasdaq and S&P 500 reaching their highest points so far this year, as strength in two reports on the housing sector and another on consumer confidence boosted investors' optimism.

The Nasdaq composite (up 46.60 to 1556.69, Charts), helped by strength among technology stocks, climbed 3.1 percent. The Dow Jones industrial average (up 179.97 to 8781.35, Charts) rose 2.1 percent, while the S&P 500 index (up 18.26 to 951.48, Charts) rose 2 percent. The Nasdaq and S&P reached new highs for the year.

"I think this is a continuation of what we've been seeing for the last six or seven weeks, with the exception of last week," said Tim Heekin, head of stock trading at Thomas Weisel Partners. It's a pretty broad-based rally. Sellers have moved to the sidelines."

Stocks have rallied in the past several weeks. Last week was the Dow's first down week after three weeks of gains. The Nasdaq and S&P each fell last week for the first time in six weeks.

But last week's losses didn't put a damper on trading Tuesday. News that sales of new homes increased 1.7 percent in April, following a strong 8.2 percent jump in March, and that sales of existing homes jumped 5.7 percent in April gave the market momentum. Housing has been a pillar of strength in recent months, while other areas of the economy have demonstrated weakness.

Some help also came from a report on consumer confidence, which showed a jump in the index to 83.8 in May, a six-month high, from April's 81.0.

"I think it's wonderful -- the market doesn't want to go down," said Ned Riley, chief investment strategist at State Street Global Advisors. "There are a lot of frustrated buyers out there that are waiting for a much larger correction, but they are being forced to chip away. ... With this market today, you just couldn't get the sellers out in force."

Scattered gains in select issues also drew attention Tuesday, as did the latest decline in the dollar, which came off another new low hit against the euro early in the day.

Wednesday lacks much in the way of economic reports, but investors will get a dose of durable goods orders. Economists polled by Briefing.com expect durable goods orders to have slipped 1 percent in April, after a 2 percent rise in March.

Toll Brothers (TOL: down $0.08 to $27.45, Research, Estimates), Krispy Kreme (KK: Research, Estimates) and Costco (COST: up $1.15 to $35.92, Research, Estimates) all report quarterly earnings on Wednesday, which likely also will garner the attention of investors.

Wall Street watched the dollar's travails Tuesday with concerned curiosity. Overnight in Asia, the euro soared to $1.1912, the highest it has been since its introduction as a common European currency in 1999. The euro also hit an all-time high against the yen.

The dollar regained some strength once European and U.S. trading began, moving back above its closing level from Friday in the late afternoon. The greenback saw small gains against the yen.

The euro has been slowly gaining weight over the past two years, but it really took off in the past two weeks following a series of statements by U.S. Treasury Secretary John Snow, who seemed to convey that a weakening dollar would have Washington's blessing.

Mixed corporate news kept investors on alert throughout the day, with strength in biotechs, networking issues and Internet stocks helping the tech sector higher.

Altria (MO: down $0.22 to $42.09, Research, Estimates) was one of three losers on the Dow. It fell 0.5 percent after UBS downgraded it to "neutral" from "buy," citing valuation. And Wal-Mart (WMT: up $0.50 to $52.50, Research, Estimates) failed to attract many buyers for its shares, rising 1 percent, even though it said it's getting enough buyers in its stores to meet its May sales projections.

Gaming stocks saw some gains, after Gerard Klauer Mattison upgraded its view of the sector to "positive" from "negative," saying they expect the second half of 2003 to have a positive tone for business. Shares of MGM Mirage (MGG: up $0.72 to $27.48, Research, Estimates) rose 2.7 percent, while Harrah's (HET: up $1.20 to $40.37, Research, Estimates) and Park Place (PPE: up $0.22 to $7.40, Research, Estimates) each rose about 3.1 percent.

Biotech shares continued to lead the tech sector higher. Human Genome Sciences (HGSI: up $1.09 to $15.50, Research, Estimates) and Gilead Sciences (GILD: up $3.64 to $51.64, Research, Estimates) each rallied 7.6 percent, while Affymetrix (AFFX: up $1.57 to $23.63, Research, Estimates) saw gains of 7.1 percent. The biotech index rose 5.4 percent.

Networking and Internet stocks also helped to lift techs, with the American Stock Exchange networking index rising 4.5 percent and the Goldman Sachs Internet index jumping 4.6 percent.

Market breadth was positive, with nearly three shares rising for every one that fell on the Nasdaq, where volume reached 1.9 billion shares. On New York Stock Exchange, advancers beat decliners by more than two to one, where 1.5 billion shares traded.

U.S. Treasury bonds were mixed, with longer issues losing some ground. The yield on the 10-year note rose to 3.43 percent from 3.33 percent Friday.

Oil turned higher again late in the day, with light sweet crude futures for July delivery gaining 19 cents to $29.35 a barrel in New York. Gold for June delivery also fell, dipping $1 to $367.80 an ounce in New York.

European markets ended the day mixed. Stocks in Asia fell overnight.