Equities and US Treasuries moved higher, while the US dollar fell, after a report showing a surprise drop in US retail sales in June, lowering expectations the Federal Reserve will hike interest rates in September.
In late afternoon trading in New York, the Dow Jones Industrial Average added 0.47 per cent, the Standard & Poor's 500 Index rose 0.52 per cent, while the Nasdaq Composite Index gained 0.84 per cent.
A Commerce Department report showed retail sales declined 0.3 per cent in June, the weakest since February, following a 1.0 per cent gain in May that was smaller than previously reported.
"The underlying tone of this report suggests that the recovery is beginning to show some signs of strain," Millan Mulraine, deputy chief economist at TD Securities in New York, told Reuters. "If anything it will temper, at the margin, any consideration for a September rate hike."
All eyes are on US Federal Chair Janet Yellen who is set to deliver her semiannual testimony to Congress on Wednesday and Thursday. Last week she said she still expects the Fed to lift rates this year.
The Dow moved higher on gains in shares of UnitedHealth and those of JPMorgan Chase, up 1.9 per cent and 1.4 per cent respectively.
Both JPMorgan as well as shares of Wells Fargo rose, last up 0.9 per cent, after the banks reported their latest earnings. JPMorgan's profit exceeded expectations as the largest US bank cut costs.
"We're starting to see the efficiency gains come through," Jeff Harte, an analyst at Sandler O'Neill & Partners, told Bloomberg before results were released. "Big banks have scale that we really haven't seen the advantage of because of litigation and regulatory expense."
Shares of Micron Technology climbed 11.9 per cent amid reports of a US$23 billion buyout by Chinese state-owned semiconductor chip designer Tsinghua Unigroup.
In Europe, the Stoxx 600 Index ended the day with a 0.5 per cent increase from the previous close. The UK's FTSE 100 Index added 0.2 per cent, while Germany's DAX increased 0.3 per cent.
Greece is gearing up for today's parliamentary vote on a euro-zone bailout, its third, secured on Monday. Adding more intrigue to the outlook for Greece, a leaked report penned by the International Monetary Fund said the nation's creditors would either need to grant Greece a three-decade debt payment grace period or accept a deep haircut on current loans.
In Germany, the ZEW Center for European Economic Research said its index of investor and analyst expectations fell less than expected, declining to 29.7 in July from 31.5 in June.
"The macroeconomic picture for the German economy does not look bad at all," Carsten Brzeski, chief economist at ING DiBa in Frankfurt, told Bloomberg. "German investors have taken the stance that the Greek crisis or even a Grexit would not harm the German economy."
Oil rose, rebounding from earlier losses, after a landmark deal was reached between Iran and six world powers to curb the nation's nuclear program in return for ending sanctions.