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NEW YORK (CNNMoney) -- U.S. stocks moved solidly higher Tuesday as investors welcomed a rise in U.S. manufacturing activity and a mixed batch of corporate earnings

The Dow Jones industrial average (INDU) rose 66 points, or 0.5%, to close at 13,279.40, the highest since December 2007.

The S&P 500 (SPX) added 8 points, or 0.6%, and is just a handful of points shy of a 2012 high. The tech-heavy Nasdaq (COMP) increased 4 points, or 0.1%.

The day's gains were broad, with more than 70% of the Dow's 30 components ending in positive territory.

Countering signs that the U.S. economic recovery may be slowing, investors were encouraged by a report that showed manufacturing activity grew last month at the fastest pace since June 2011.

"This comes as a big surprise, because activity in the New York, Philadelphia and Chicago regions slowed materially last month," said Katy Lien, director of research and analysis at Global Forex Trading. "The details of the report showed strength in new orders, production, new export orders, employment, supplier deliveries and customer inventories."

Meanwhile, manufacturing in China continued to recover for the fifth straight month, helping allay concerns about the economy slowing too quickly.

Fears about a so-called hard landing in China, a stalled U.S. recovery and a flare-up in Europe's debt crisis have been weighing on investors, and were the main reasons for the stock market's loss of momentum in April.

U.S. stocks finished in the red on Monday, posting their worst monthly returns of the year in April.

Economy: Construction spending rose only 0.1% in March. While that's an improvement from the 1.4% decline in February, the reading was below analyst estimates for a 0.5% increase.

April U.S. auto sales came in mostly ahead of expectations and prompted further optimism about the industry's outlook in the months to come. Overall for 2012, TrueCar projects 14.5 million new car sales in the U.S., up from 12.8 million last year.

Toyota (TM), which a year ago was reeling from the Japanese earthquake and tsunami disaster, bounced back strongly with 12% sales growth in the United States versus last year.

Sales at General Motors (GM, Fortune 500) fell 8% in April, while Ford Motor (F, Fortune 500) sales slipped 5% in the same period. Meanwhile, sales at Chrysler spiked 20%, making it the best April since 2008 for the automaker, which is owned by Fiat.

Companies: Shares of Shutterfly (SFLY) edged higher after the online photo-sharing company beat first-quarter results and boosted its outlook for the second quarter and the remainder of the year.

Shares of BP (BP) lost ground after the oil company posted a drop in quarterly earnings and missed analyst estimates. BP joined Exxon Mobil (XOM, Fortune 500) and ConocoPhillips (COP, Fortune 500) as major oil companies to miss forecasts for the first quarter.

Chesapeake Energy (CHK, Fortune 500) shares jumped after Chairman and CEO Aubrey McClendon agreed to an early termination of the controversial perk that allowed him to take personal stakes in wells drilled by the company. The company also said its board will name an "independent, non-executive chairman in the near future," though McClendon will continue in his role as CEO.

Sears' (SHLD, Fortune 500) stock jumped after the retailer lifted its outlook and said it expects to turn a profit in the first quarter, compared to analysts' expectations for a loss.

Shares of P.F. Chang's (PFCB) surged after the restaurant chain announced that it is being bought by investment firm Centerbridge Partners. The deal, valued at $1.1 billion, will take P.F. Chang's private and is expected to close by the end of the third quarter.

Shares of Phillips 66 (PSX) were lower on their first day of trading. ConocoPhillips (COP, Fortune 500) spun off its refineries, pipelines and chemicals divisions into the new company called Phillips 66.

Shares of Herbalife (HLF), which sells health care and weight management products through a network of independent distributors, tumbled after hedge fund Greenlight Capital's founder David Einhorn posed a series of questions to Herbalife's executives during the company's earnings conference call. Einhorn, who is known for making short bets against companies, asked for details about the company's sales sources and disclosures that have been provided in the past.

Delta Air Lines (DAL, Fortune 500) announced plans Monday to purchase an oil refinery outside of Philadelphia, a novel approach to reducing its fuel costs. Shares of the airline rose.

World markets: Britain's FTSE 100 (UKX) finished up 1.3%. Markets in Paris and Frankfurt were closed for the May Day holiday.

Japan's Nikkei (N225) ended down 1.8%, while markets in Hong Kong and Shanghai were closed for the holiday.

Meanwhile, Australia's central bank announced it was cutting its key interest rate by 0.5 percentage points to 3.75%, due to below trend growth in Australia and globally. It was the bank's biggest rate cut since February 2009, when global financial markets were still in near free fall.

Currencies and commodities: The dollar gained ground against the euro, the British pound and Japanese yen.

Oil for June delivery rose $1.29 to settle at $106.16 a barrel.

Gold futures for June delivery fell $1.80 to settle at $1,662.40 an ounce.

Bonds: The price on the benchmark 10-year U.S. Treasury were lower, with the yield rising to 1.96% from 1.91% late Monday.

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