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NEW YORK (Reuters) - U.S. stocks closed higher on Tuesday, adding to the previous session's rally as rising oil prices boosted the energy sector, while U.S. Treasury yields rose on speculation about a possible December Federal Reserve interest rate hike.
After a volatile morning, U.S. stocks settled into positive territory in the afternoon. The Nasdaq 100 index .NDX of major companies closed at a record high, driven by technology stocks while the S&P 500 touched its highest since late July.
While energy stocks have risen 22 percent since late August, the sector is still down 10 percent year to date.
"I think there has been a real desire on the part of some investors to take advantage of depressed valuations,” said Eric Wiegand, senior portfolio manager with U.S. Bank Wealth Management in New York.
But while investors piled into the beaten-down sector, Robert Pavlik, chief market strategist at Boston Private Wealth in New York, questioned whether it would continue to rise.
"You have to be careful with that trade because there doesn't seem to be a dramatic increase in (oil) demand," he said. "I can't see oil dramatically reversing to the upside so I'm participating in it but doing it cautiously."
The Dow Jones industrial average .DJI rose 89.39 points, or 0.5 percent, to 17,918.15, the S&P 500 .SPX gained 5.74 points, or 0.27 percent, to 2,109.79 and the Nasdaq Composite .IXIC added 17.98 points, or 0.35 percent, to 5,145.13.
The three top U.S. indexes had already risen around 1 percent or more on Monday. [.N]
U.S. benchmark US10YT=RR and short-dated Treasury yields hit over six-week highs on continued expectations of a December Fed rate hike. Surging corporate issuance contributed to long-dated yields touching six-week highs.
Speculation about a December hike, the rising bond yields and generally in-line U.S. economic data boosted the dollar. After falling on Monday, the dollar .DXY was up 0.3 percent against a basket of major currencies while the euro EUR= fell 0.5 percent against the dollar.
U.S. manufacturing in October hit a 2-1/2-year low but a rise in new orders offered hope for a sector buffeted by a strong dollar and relentless spending cuts by energy companies.
Crude oil prices rose almost 4 percent as a rally in U.S. gasoline and diesel added support to oil markets already boosted by an industry strike in Brazil and force majeure for Libyan crude loadings. [O/R]
Brent LCOc1 settled up 3.6 percent or $1.75 at $50.54 a barrel, while U.S. crude CLc1 settled up 3.8 percent or $1.76 at $47.90.
Gold XAU= was down for a fifth straight day at $1,117.56 an ounce, touching its lowest in just over a month, while copper CMCU3 gave back gains from earlier in the day and was roughly in line with where it ended the day before.
Additional reporting by Sam Forgione and Lewis Krauskopf in New York; Editing by Meredith Mazzilli and James Dalgleish