Stocks soar after Obama signals progress on debt limit talks

Stocks add to gains after press briefing by president. With a surge of 200 points before falling back, Dow having its best day in three months as investors pile into stocks.

Stocks jumped sharply Tuesday, extending their previous gains, following a handful of upbeat corporate earnings and after President Obama's statement about the ongoing debate on how to cut the deficit and raise the debt ceiling.

The Dow Jones Industrial Average surged, led by IBM and Coca-Cola, after ending sharply lower in the previous session. The blue-chip index was up 206 points at its session high and is having its best day since Apr. 20.

The S&P 500 and the tech-heavy Nasdaq also rose. The CBOE Volatility Index, widely considered the best gauge of fear in the market, slid below 20.

Most key S&P sectors were higher, led by techs and consumer discretionary.

Stocks added to previous gains after President Obama endorsed the debt deal proposed by the bipartisan "gang of six" senators to cut the deficit by more than $4 trillion.

"It certainly seems like they're trying to get a deal...and that will take one uncertainty out of the market," said Joe Saluzzi, co-manager of trading at Themis Trading. "Now it's just a question of what kind of deal it will be."

'As of right now, [stocks are] going to rally on any chance of a deal," said Saluzzi.

“Markets are swinging on a pendulum between macro and microeconomic issues,” said Nicholas Colas, chief market strategist at ConvergEx Group. “It’s hard to know which side of the fence the metronome’s going to swing.”

On the earnings front, Wells Fargo posted a higher quarterly profit as the bank dipped into funds previously set aside for bad loans.

However, Goldman Sachs reported earnings that fell far short of Wall Street estimates, sending shares lower. And Bank of America posted a loss after an $8.5 billion settlement with mortgage bond investors. The banking giant closed below $10 a share on Monday, for the first time since June 2009.

The financials have been under pressure in the last few sessions and is the only sector in the red for the year.

"The financial sector is the 'canary in the coalmine' and it’s the sector that will have to lead us higher and lower," said Colas.

IBM surged after the tech giant posted stronger-than-expected earnings after-the-bell Monday and raised its full-year guidance, helped by strong sales of its computers and software. At least three brokerages raised their price targets on the firm.

Coca-Cola earnings topped estimates, helped by strong growth in markets outside the U.S. And Johnson & Johnson also said earnings beat estimates.

And Harley-Davidson soared almost 10 percent to lead the S&P 500 index after the motorcycle maker posted a higher-than-expected profit on strong sales and raised its forecast for shipments.

Investors will be focusing on Apple and Yahoo, which are due to report earnings after-the-bell. Shares of Apple hit a 52-week high as investors bet that the iPod maker will beat earnings expectations, as it has done for every quarter since 2004.

Cisco gained after the tech bellwether said it plans to cut its workforce by 11,500 employees as part of its plan to cut annual expenses by $1 billion and revive its business.

News Corp's Rupert and James Murdoch spoke before UK members of parliament on the ongoing phone hacking scandal. The S&P putting the company's debt on "ratings watch negative." However, shares were still trading higher. (Read More: Man Attempts to Hit Murdoch With Foam Pie at Hearing)

Oil prices rallied amidstrong economic data as U.S. light, sweet crude gained above $98 a barrel, while London Brent crude traded near $118. Meanwhile, gold eased off its record highs, trading near $1,600 an ounce.

On the economic front, housing starts rose more than expected in June totouch a six-month high and permits for future construction saw a surprise increase, according to the Commerce Department.

Lennar and D.R. Horton climbed more than 4 percent following the news.

European shares ended higher after banks bounced back from two-year lows ahead of a crucial meeting of political leaders aimed at resolving the regional debt crisis.