U.S. stocks closed higher on Tuesday as investors' expectations of further monetary easing policy by the Federal Reserve boosted the market, while positive news from Europe also provided support.

The Dow Jones industrial average gained 95.51 points, or 0.75 percent, at 12,837.33. The Standard & Poor's 500 was up 13.20 points, or 0.98 percent, to 1,357.98. The Nasdaq Composite Index rose 34.43 points, or 1.19 percent, to 2,929.76.

The Federal Open Market Committee met on Tuesday, discussing monetary policies. Investors had hoped that the central bank would provide more stimulus measures as the European debt crisis worsened, while the U.S. economy recently showed weakness.

The G20 summit in Mexico is scheduled to end on Tuesday, which also caught investors' attention. The talks focused on Europe's debt crisis on Monday, with euro zone leaders considering steps towards a banking union.

Meanwhile, the European debt crisis continued to haunt the market. Spain sold 3.04 billion euro short term government bonds on Tuesday with soaring yield. The yield of 12-month is the highest in 15 years.

In Greece, the conservative New Democracy party is prepared to form a coalition government and ready to renegotiate the terms of Greece's 130 billion euro bailout agreements.

Reports said Germany is going to end its opposition to the euro zone bailout funds buying the sovereign debt of troubled European countries. The money would come from the 500 billion euro European Stability Mechanism and the 250 billion euro European Financial Stability Facility.

On the economic front, U.S. housing starts fell 4.8 percent to a seasonally adjusted rate of 708,000 units in May, lower than previous estimate of 720,000, according to the Commerce Department. However, building permits surged to its highest in more than three years, which suggested that recovery of the housing market was mixed.

Among financials, JPMorgan Chase gained more than 2 percent after its Chief Executive Officer Jamie Dimon testified to the House Committee on Financial Services about the firm's 2 billion dollar trading loss from a failed hedging strategy.

Bank of America also gained on Tuesday as the bank is considering selling its overseas wealth unit.

As for other markets, dollar turned down on Fed's expectations and a stronger euro, while oil price gained nearly 1 percent to 84. 03 dollars a barrel.

VietNamNet/Xinhuanet