By Riva Gold and Akane Otani 

U.S. stocks edged higher Tuesday as financials extended their recent rally.

Shares of telecommunications companies also boosted U.S. stocks, helping the Dow Jones Industrial Average post another record.

Gains in Goldman Sachs Group and Verizon Communications helped lift the blue-chip index, which rose 36 points, or 0.2%, to 19252. The S&P 500 rose 0.3%, led by gains in telecom and financial shares, and the Nasdaq Composite gained 0.5%.

U.S. oil prices retreated following four consecutive sessions of gains. Crude had rallied after members of the Organization of the Petroleum Exporting Countries struck a long-sought agreement to reduce production last week, but prices fell 1.7% to $50.93 a barrel Tuesday as some analysts questioned whether the cartel would stick to the terms of the agreement in coming months.

In recent weeks, the stabilization in oil prices and the election of Donald Trump have contributed to expectations of higher inflation. Investors hoping to take advantage of a higher-growth environment have dumped government bonds and picked up more cyclical pockets of the stock market, such as the financial and industrials sectors.

U.S. government bond yields have been rising since Election Day. They climbed again Tuesday, with the yield on the 10-year U.S. Treasury note rising to 2.396% from 2.387% Monday, according to Tradeweb.

"All year, the stock market has been pricing out deflationary pressures, and the Trump victory pushed the door wide open to the thought that fiscal stimulus is closer," said Scott Meech, a fund manager at Union Bancaire Privée.

Some investors have cautioned that the president-elect's potential policies -- which include cutting taxes and ramping up infrastructure spending -- may not pan out as expected.

"The market is probably a little bit ahead of itself," said Carin Pai, director of equity management at Fiduciary Trust Company International. "We're still in a slow-growth environment, but the market is reacting and performing as though [gross domestic product] growth rates are much higher than where we're at."

Earlier, the Stoxx Europe 600 rose 1%, led by the banking and utilities sectors. The FTSE Italia All-Share Banks index rose 9% after it fell a day earlier when Italian Prime Minister Matteo Renzi resigned after a referendum defeat over the weekend.

Later this week, the European Central Bank is scheduled to meet and it could announce an extension of its massive bond-buying program.

"The ability of markets to brush off many of these [political] events has come from knowledge that central banks stand ready to step in, in a big way," said Michala Marcussen, global head of economics at Société Générale.

"What [ECB President Mario] Draghi tells us Thursday will be very important -- he has to be reassuring he can deal with any risks, even as the underlying economy says the time is right to start considering tapering," she said.

Japan's Nikkei Stock Average added 0.5%, while Hong Kong's Hang Seng Index gained 0.8%, in the second day of a new trading link between the city's exchange and Shenzhen.

Write to Riva Gold at riva.gold@wsj.com and Akane Otani at akane.otani@wsj.com

(END) Dow Jones Newswires

December 06, 2016 16:24 ET (21:24 GMT)

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