Stocks Rally on Fed Stimulus Hopes

NEW YORK (TheStreet) -- The major U.S. equity indices finished sharply higher on Tuesday as risk-tolerant investors bet that additional fiscal stimulus is forthcoming from the Federal Reserve.

For the day at least, Wall Street was looking past the eurozone's ongoing troubles as Spain continued to deal with rising borrowing costs. Reuters reported that the country had to pay "a euro era record price to sell short-term debt" on Tuesday.

The Fed is wrapping up a two-day policy meeting on Wednesday afternoon with the majority of central bank watchers expecting a move toward increased accommodation, most likely an extension of Operation Twist.

TheDow Jones Industrial Average rose more than 95 points, or 0.75%, to close at 12,837. The blue-chip index ran as high as 12,899 during the session and is now up 5.1% so far in 2012.

The S&P 500 advanced 13 points, or 0.98%, to finish at 1358, marking a fourth straight day of gains. It's now up 8% year-to-date.

The Nasdaq Composite was the biggest winner, surging more than 34 points, or 1.2%, to settle at 2930. The index has appreciated 12.5% since the start of the year.

Of the 30 Dow components, 23 were gaining ground, led by Bank of America(BAC) , Microsoft(MSFT) , Caterpillar(CAT) and Alcoa(AA) .

The financials, energy and basic materials sectors saw the biggest gains as all ten large-cap sectors within the S&P 500 moved higher.

Gainers were outpacing losers by a 5-to-1 ratio on the New York Stock Exchange and a 3-to-1 ratio on the Nasdaq.

Shares of Microsoft closed up nearly 3% after the software giant unveiled a new tablet product called Surface.

McDonald's(MCD) , Hewlett-Packard(HPQ) , AT&T(T) , and Wal-Mart Stores(WMT) were among the blue chips losing ground.