By Joe Wallace and Paul Vigna
U.S. stocks rose Tuesday even as investors weighed the prospects of a protracted economic recovery following the coronavirus lockdowns, outbreaks of violence across American cities and tensions with China.
The Dow Jones Industrial Average climbed 267.63 points, or 1.1%, to 25742.65, led by Home Depot, American Express and Goldman Sachs. The S&P 500 rose 25.09 points, or 0.8%, to 3080.82, and the Nasdaq Composite added 56.33 points, or 0.6%, to 9608.37. The technology-heavy gauge is only 2.1% below its February high.
The benchmark S&P 500 has risen for six of the past seven sessions -- and is up 38% from its March low -- boosted by data suggesting the downturn in the U.S. economy has bottomed and hopes that the coronavirus will be brought under control. Many analysts attribute the recent rebound to an unprecedented level of stimulus offered by the Federal Reserve and Congress.
"There's just so much stimulus, it's propping up the market," said Oanda analyst Edward Moya. "The stock market is now no longer a true reflection of the economy, and you're going to see that remain the case for several years."
The U.S. economy could take the better part of a decade to fully recover from the pandemic and related shutdowns, a U.S. budget agency said Monday. Output isn't expected to catch up to a previously forecast level until the fourth quarter of 2029, the nonpartisan Congressional Budget Office said.
"It's clear that we're not going to go back to the levels [of economic activity] we saw pre-Covid-19," said Sophie Huynh, a strategist at Société Générale. "It's impossible: We're living in a self-inflicted recession. We're going to start the post-Covid 19 world at the start of a new economic cycle."
Cities across the U.S. faced another night of protests sparked by the death of George Floyd in Minneapolis last week. Some major metropolitan areas, including New York and Los Angeles, either issued or extended nighttime curfews. President Trump called for a tougher government response to the violent unrest and said he is ordering thousands of armed soldiers and law-enforcement officers to the nation's capital.
The unrest has added to challenges faced by businesses seeking to get back up and running following lockdowns designed to stem the coronavirus pandemic. Macy's delayed the reopening of some stores shut during the pandemic. Apple stores that had recently unlocked their doors were boarded up. Investors have largely shrugged off the impact of the protests on earnings and the economy.
The U.S. will be dealing with the effects of the pandemic, economic recession, riots and even excessive government spending for years, while the market is betting it is all just a short-term blip, said Lindsey Piegza, chief economist at Stifel Financial.
"That's a really bold assumption by investors," she said.
Investors also continued to monitor tensions between the U.S. and China, which have feuded in recent weeks over Beijing's handling of the coronavirus and its crackdown on Hong Kong.
Among individual stocks, Western Union rose 11% and was the top performer in the S&P 500 after Bloomberg News reported that the money-transfer provider was seeking to buy MoneyGram International.
There were also signs of life in the IPO market. Warner Music Group and ZoomInfo Technologies plan to list their shares Wednesday and Thursday in what would be the biggest overall IPO and the top new technology issue of the year, respectively.
In bond markets, the yield on the 10-year U.S. Treasury note rose to 0.679% from 0.669% Monday.
U.S. crude futures rose 3.9% to $36.81. An alliance of oil-producing nations, led by Saudi Arabia and Russia, is close to a deal that would extend output cuts through Sept. 1, according to delegates. The Organization of the Petroleum Exporting Countries has agreed to move a planned conference call to discuss future output curbs to Thursday, they said.
International stocks gained ground, extending a recent rally fueled by hopes of a rebound in the global economy. The Stoxx Europe 600 advanced 1.6%, led by shares of auto and auto-parts makers.
Germany's DAX index surged 3.7%, following a public holiday Monday, on reports that Chancellor Angela Merkel's ruling coalition is holding talks about delivering a second spending package to boost the country's economy.
"There's a lot of positivity starting to build up around Europe," said James McCormick, head of desk strategy at NatWest Markets, pointing to a decline in new coronavirus cases and relaxation of lockdown measures on the Continent.
Japan's Nikkei 225 closed 1.2% higher, while Hong Kong's Hang Seng Index rose 1.1%.
Xie Yu contributed to this article.
Write to Joe Wallace at Joe.Wallace@wsj.com and Paul Vigna at firstname.lastname@example.org