NEW YORK (CNNMoney) -- U.S. stocks rose Tuesday as investors welcomed a lack of negative headlines out of Europe and hopes that China will move to support its economy.
The gains came despite a weaker-than-expected report on U.S. consumer confidence and continued declines in home prices.
The Dow Jones industrial average () rose 126 points, or 1%, to end at 12,580. The S&P 500 ( ) added 14 points, or 1.1%, to 1,332. The Nasdaq ( ) rose 33 points, or 1.2%, to 2,871.
U.S. investors came off a holiday weekend with a renewed focus on Europe's debt crisis, which has been dominant in recent months.
"We're still in a pattern where Europe is driving the bus," said Art Hogan, a managing director at Lazard Capital Markets. "Fortunately, for the moment there is no disaster du jour to take out our legs, so stocks are rallying."
Investors were encouraged by signs over the weekend that pro-bailout parties in Greece were gaining in the polls. In addition, four major Greek banks received recapitalization funds under the nation's bailout program. The extra capital helped ease concerns that a so-called bank jog in Greece could develop into a full-blown run.
Spain is also prominent in investors' minds amid fresh worries about the health of its banking system, after the Spanish government agreed last week to inject €19 billion into one of the nation's largest lenders.
The yield on 10-year Spanish government bonds eased slightly Tuesday, one day after the spread between Spanish and German debt reached the highest level since the creation of the euro.
Investors have also been fearful that the slowing of China's economy could cause a so-called "hard landing" for the world's No. 2 economy. But there is speculation Beijing will announce more stimulus spending in China, including a program to spur auto purchases.
The Chinese government has disputed the talk of impending stimulus, said Dan Greenhaus, chief equity strategist at BTIG. "But it's clear China is inching closer to some level of fiscal support," he added.
But the focus could shift back to the U.S. economy from overseas worries, given the importance of upcoming economic reports.
Due later this week are the May jobs report, key readings on manufacturing and auto sales. Economists surveyed by CNNMoney forecast that employers added 150,000 jobs in May, and that unemployment remained at 8.1%.
U.S. stocks fell Friday, but ended higher for the week, as concerns about the debt crisis in Europe continued to weigh on the market. U.S. markets were closed Monday for Memorial Day.
Worries over Greece's future and the broader region's debt problems have already triggered deep losses in U.S. stocks and international markets this month. The S&P 500 and Dow are down almost 6% in May, and headed for their worst monthly losses since November 2011.
CNNMoney's Fear & Greed index, which measures investor sentiment, remains firmly in extreme fear territory.
Economy: The Conference Board's Consumer Confidence Index for May fell to 64.9, after falling to 68.7 last month. Economists had expected the index to ease to 69.4 in May, according to a consensus forecast from Briefing.com.
The Case-Shiller 20-city Index, which tracks home prices, fell at a 2.6% annual rate in March, after falling at a 3.5% rate in the prior month. Economists had expected the index to have slipped 2.8%.
Companies: Shares of Facebook ( ) fell another 9.6% to $28.84, hitting a new low since the social media giant debuted as a public company earlier this month. Facebook is now trading at more than 24% below its IPO price.
Oil for July delivery fell 10 cents to settle at $90.76 a barrel.
Gold futures for June delivery fell $20.02 to $1,552.80 an ounce.
Bonds: The price on the benchmark 10-year U.S. Treasury rose, with the yield falling to 1.72% from 1.74% on Friday.
World markets: European stocks closed higher. Britain's FTSE 100 ( ) gained 0.6%, the DAX ( ) in Germany added 1.2% and France's CAC 40 ( ) climbed 1.3%
|The Winklevoss twins are Bitcoin bulls|
|Bernanke's advice for college grads|
|Signs of new housing bubble in several areas|
|Bloomberg's lazy Apple bias|
|Overnight Avg Rate||Latest||Change||Last Week|
|30 yr fixed||3.66%||3.58%|
|15 yr fixed||2.79%||2.72%|
|30 yr refi||3.64%||3.57%|
|15 yr refi||2.79%||2.72%|
Today's featured rates: