U.S. stocks also were buoyed Tuesday after Federal Reserve policymakers, holding a regularly scheduled meeting, said in their post-meeting statement that the domestic economy appeared to be on "firmer footing, and overall conditions in the labor market appear to be improving gradually" since late January.
However, the Fed also pledged to continue with its program of buying Treasury bonds to help suppress interest rates and underpin growth. That $600-billion program will end as planned in late June, the Fed said.
Many stock market bears say Wall Street's powerful rally since late August has been fueled more by the central bank's easy-money policies than by economic fundamentals. Cheap money, critics say, has encouraged speculation in stocks and other high-risk assets.
But market bulls side with the Fed's view that the economy is gradually improving, which could underpin continued growth in corporate earnings. Analysts expect first-quarter operating earnings of the Standard & Poor's 500 companies to be up 13.5% from a year earlier, according to Thomson Reuters.
"The recipe is still there for the profit story to continue," Swanson said.
Some analysts say investors could soon begin focusing on the potential lift that Japanese rebuilding could give the global economy.
"When it comes to natural disasters, they destroy a lot, but in the effort to rebuild they generate a lot of new activity," said Jim Glassman, senior economist at JPMorgan Chase & Co. in New York. "The rebuilding effort is what really dominates in the long run."
Chris Rupkey, chief financial economist at Bank of Tokyo Mitsubishi in New York, said the panic that struck Tokyo shares Tuesday should subside as investors get more information about the extent of the damage at the Fukushima reactors and the threat it poses to the environment.
"If the radiation risk becomes known, this situation could calm down very quickly, and the Nikkei could come back an easy thousand points," Rupkey said.
tom.petruno@latimes.com
nathaniel.popper@latimes.com
