S&P 500 rises on economic recovery and vaccine hopes, pulls back from highs

• The benchmark S&P 500 had crossed 3,000 for the first time since March 5 before dropping back.

NEW YORK: US stocks closed higher on Tuesday on optimism about developing coronavirus vaccines and the revival of business activity, but the S&P 500 failed to hold above the key psychological level of 3,000 points.

Stocks pared gains late in the session, after Bloomberg News reported the Trump administration was weighing a range of sanctions on Chinese officials, businesses and financial institutions, reinforcing comments earlier in the day from White House adviser Larry Kudlow.

Kudlow said President Donald Trump was "so miffed with China on virus and other matters that the trade deal is not as important to him as it once was."

The benchmark S&P 500 had crossed 3,000 for the first time since March 5 before dropping back.

The S&P 500 has risen about 37% from its March 23 low on central bank and government stimulus at a time when the U.S. economy is seeing its biggest job losses since the Great Depression of the 1930s. It is now about 11% below its February record high.

On Monday, California, which has had one of the country's most restrictive shutdowns, said it would allow retail businesses to offer in-store shopping and places of worship to reopen.

On top of vaccine-related news, Shawn Snyder, head of investment strategy at Citi Personal Wealth Management, pointed to better-than-expected home sales data and comments from JPMorgan Chase CEO Jamie Dimon.

"When you add the news all together everyone's getting a boost," Snyder said.

Data showed U.S. consumer confidence nudged up in May, adding to hopes that the worst of the economic impact of the shutdown is in the past.

Unofficially, the Dow Jones Industrial Average rose 531.53 points, or 2.17%, to 24,996.69, the S&P 500 gained 36.36 points, or 1.23%, to 2,991.81, and the Nasdaq Composite  added 15.63 points, or 0.17%, to 9,340.22.

U.S. biotech group Novavax Inc soared as it joined the race to test coronavirus vaccine candidates on humans and enrolled its first participants. Merck & Co Inc advanced  after it announced plans to develop two separate vaccines.

While macroeconomic data was pointing at a deep recession, Citi's Snyder was focused on the recovery. But he questioned how much further the market would rise with the U.S. presidential election in November and simmering U.S.-China tensions.

"The returns from here will be harder to come by," he said.

Beaten-down travel-related stocks climbed including the S&P 1500 airlines stocks index and cruise operators including Carnival Corp.

The New York Stock Exchange on Tuesday partially reopened its trading floors at the iconic 11 Wall Street building, which had been closed since March 23.