By Tomi Kilgore
U.S. stocks edged higher Tuesday, with the recently hard-hit technology sector leading the gains ahead of the start of earnings season.
The Dow Jones Industrial Average advanced 22 points, or 0.1%, to 16268. The Dow was down as much as 66 points, or 0.4%, earlier in the session.
The S&P 500 index gained six points, or 0.3%, to 1851, while the technology-oriented Nasdaq Composite Index advanced 34 points, or 0.8%, to 4114.
Trading steadied midday after a choppy start, which saw the benchmark indexes swing between gains and losses in the first hour of trading, before turning higher.
The Nasdaq had been hit particularly hard recently amid sharp declines in previously highflying technology and biotechnology stocks. The index lost 4.6% over the previous three sessions--the biggest three-day percentage decline since November 2011.
Meanwhile, the Dow lost 327 points, or 2%, over the previous three sessions.
Jeffrey Kleintop, chief market strategist at broker-dealer LPL Financial, said the market's weakness had stemmed from concerns over valuations, ahead of what many investors expect to be a lackluster first-quarter earnings season.
First-quarter earnings among companies in the S&P 500 are expected to decline 1.3% from a year earlier, according to consensus analyst estimates compiled by FactSet. A drop would mark only the second year-over-year decline in earnings since the financial crisis.
Alcoa's report after the closing bell marks the unofficial kickoff of earnings season. The aluminum giant's stock was up 0.6% Tuesday, after shedding 4.4% over the previous four sessions.
"This is the day the market has been waiting for," Mr. Kleintop said. "This may not be a great quarter" for earnings, he said. But he believes outlooks for the second-quarter "could surprise to the upside" as companies likely saw business improve, along with the weather, at the end of the first quarter.
Terry Sandven, chief equity strategist at U.S. Bank Wealth Management, which has $115 billion in assets under management, said the recent pullback in stocks was warranted as investors turned increasingly cautious as earnings approached. "We've seen expectations for earnings growth wane, and that's been weighing on sentiment," Mr. Sandven said. He believes that sets up overall results to exceed expectations, and for stocks to continue to trend higher.
"In part because the bar is low, the bias is to the upside." Mr. Sandven said. He said given that the economy continues to show improvement, and valuations in the broad market are still fair, "the fundamental backdrop is still favorable for stocks to continue to trend higher."
Despite all the recent volatility, the S&P 500 was still up 0.2% on the year, while the Nasdaq was down just 1.4%.
"I like the risk-versus-reward [outlook for stocks] at these levels," Mr. Sandven said.
The yield on the 10-year Treasury note was little changed at 2.697%. Gold futures rose 0.8% to $1,308.90 an ounce, while crude oil futures gained 0.8% to $101.26 a barrel. The dollar declined against the euro and the yen.
In Europe, the Stoxx Europe 600 lost 0.3%, after falling 1.2% on Monday to snap a nine-session win streak.
Asian markets showed no real direction, as Japan's Nikkei Stock Average slid 1.4% while China's Shanghai Composite climbed 1.9%.
In corporate news, Tesla Motors rallied 3.3% after the company said it has started offering a business leasing program for its small and medium-size business customers, which allows them to deduct the payments from their business taxes.
Tesla was among the recent highfliers that was hit hard over the last month amid worries over valuation. The stock has lost 12% since the end of February, but was still up 42% since the start of the year.
Elsewhere, the U.S.-listed shares of Finnish mobile-phone giant Nokia rallied 5.5% after the company received Chinese regulatory approval for the sale of its handset business to Microsoft. Dow component Microsoft slipped 0.1%.
Write to Tomi Kilgore at email@example.com