Data, Calendar Boost Stocks

The bond market weakened Tuesday on the strong-growth data, as a hard economic landing and rate cuts seem less likely with such a robust services sector. The 30-year Treasury bond fell 16/32 to yield 4.57%, while the 10-year note dropped 4/32 to yield 4.44%. The two-year note was unchanged, yielding 4.51% on the day.

The fed funds futures market also ratcheted back its time frame for rate-cut expectations on the day's data. The market prices in 20% odds of a cut at the January meeting, down from 32% earlier in the trading session, according to Miller Tabak. The market prices in 60% odds of a cut at the March meeting, down from 72%. Odds of a cut in May remain at 100%, but the market places only 40% odds of a second cut at that meeting, down from 50% earlier.

Hope Floats Homebuilders

Also boosting stocks Tuesday, homebuilder Toll Brothers(TOL Quote), which posted dismal fourth-quarter earnings, gave investors what they wanted to hear when CEO Robert Toll was optimistic about a bottom in some residential markets. Toll Brothers' shares gained 3%. The Philadelphia Housing Sector Index gained 2% on the day.

Meanwhile, Starbucks (SBUX Quote) and Qualcomm (QCOM Quote) were boosted by sell-side analysts, and Direct General (DRCT Quote) was the latest winner in the private equity derby. Shares of the insurer jumped 24% after it agreed to be acquired by Texas Pacific and Fremont Partners.