Stocks joined their overseas counterparts in recouping at least a portion of Monday's sharp drop. Investors looked past some disappointing numbers on housing starts and focused on surprise results from key retailers that soothed concerns over consumer spending for the time being.

U.S. housing starts were flat in July, not quite the improvement that Wall Street econmists expected. But single-family permits continued to rise for a fourth straight month.

Separately, July PPI fell 0.9% compared to the Street's view for a 1% drop. Core PPI, excluding food and energy, fell 0.1%, not the 0.1% gain that economists predicted.

Stocks also gained following upbeat commentary from a leading economist.

The global recession is over and a recovery has begun, the International Monetary Fund's chief economist Olivier Blanchard said Tuesday. But he warned that because this global recession has not been typical, the recovery will be slow.

Several analysts are on record Tuesday saying the past days' correction does indicate vulnerability for the broad market's six-month rally.

Stock gains and dollar weakness helped oil futures bounce back nearly 4% after two days of declines. September closes above $69 a barrel, adding $2.44.

Financial stocks were firmer and among the volume leaders following upgrades for American Express ( ), HSBC ( ) and Goldman Sachs ( ).

Retail stocks were broadly higher after mostly upside surprises.

Target ( ) gained after it reports Q2 EPS of $0.79 per share, down from $0.82 per share a year ago but well ahead of the analyst mean of $0.66 per share. Sales were down 2.7% to $14.6 bln, below the Street view of $15.1 bln.

Home Depot ( ) gained after it reports Q2 earnings of $0.66 per share, down from $0.71 per share in the year ago quarter.