MATERIAL GAINS: Dow Chemical climbed $2.67, or 6 percent, to $45.74 after hedge fund Third Point said it had taken a stake in the company and wants it to spin off its petrochemicals division. Alcoa surged 91 cents, or 8 percent, to $12.27 after analysts at JPMorgan raised their price target for the stock, predicting Alcoa will benefit from tightening aluminum markets.
EARNINGS WATCH: "Earnings have been good but not great," said J.J. Kinahan, chief strategist at TD Ameritrade. Before Tuesday's earnings reports came out, about half of the companies that had released earnings had beaten analysts' expectations, according to S&P Capital IQ. Earnings are forecast to rise 5.3 percent in the fourth quarter over the same period a year ago.
ECONOMY LIGHT: Company earnings will likely be the main focus for investors this week. There are no major economic releases scheduled for Tuesday and the Federal Reserve's next policy meeting won't start until next week.
MORE CUTS COMING: Fed policymakers will further reduce their economic stimulus after the meeting, according to the Wall Street Journal, which cited interviews with central bank officials and their most recent speeches. The Fed in December decided to reduce its monthly bond purchases to $75 billion from $85 billion. The stimulus has kept long-term interest rates low and helped underpin a rally in stocks.
GAINING ALTITUDE: Delta increased 91 cents, or 3 percent, to $31.98 after reporting a better-than-expected profit in the fourth quarter as fares and traffic rose. The airline's president said demand was strong, and forecast that profit margins would increase in the current quarter.
BONDS AND COMMODITIES: The yield on the 10-year Treasury note rose to 2.83 percent from 2.82 percent on Friday. U.S. markets were closed Monday for the Martin Luther King Jr. Day holiday. The price of oil rose 27 cents, or 0.3 percent, to $94.86 a barrel. Gold fell $10.10, or 0.8 percent, to $1,242 an ounce.