Stocks added to highs Tuesday after manufacturing activity improved at a better-than-expected pace in February. 

The S&P 500 was up 1.3%, the Dow Jones Industrial Average added 1%, and the Nasdaq gained 1.6%.

Manufacturing activity last month remained just shy of growth as a stronger U.S. dollar and weaker global demand continued to deter growth. The ISM manufacturing index hit 49.5 in February, up from 48.2 in January and better than an expected 48.5 reading. 

Construction spending in January climbed 1.5%, an eight-year high and far better than estimated 0.4% growth. Spending increased a meager 0.1% in December. 

A separate read on the manufacturing sector in February showed activity cooling, though not as much as initially expected. Manufacturing activity in February fell to a reading of 51.3 in February, down from 52.4 in January, according to the final read on the U.S. Markit purchasing managers index. However, that was slightly above an initial reading of 51. 

China's central bank made more moves to support its economy on Monday after cutting the amount banks are required to hold on reserve. The People's Bank of China cut the reserve requirement by half a percentage point. This marks the fifth time it has cut its reserve requirement in a year. China's stock market didn't have a chance to react to the news with the announcement made late on Monday. China's Shanghai Composite closed 1.8% higher on Tuesday.

Hopes for even more stimulus from the PBOC also spurred China's market rally. China's factory activity worsened in February to its worst level since November 2011, another sign of a significant slowdown in the world's second-largest economy. China's purchasing managers' index fell to 49, indicating a contraction, while its nonmanufacturing PMI read fell to 52.7, its worst growth since late 2008.

Crude oil gave back earlier gains on Tuesday after touching a two-month high. The commodity had a solid start to the week on high hopes over an agreement between Russia and members of the Organization of Petroleum Exporting Countries over a production freeze. Saudi Arabia voiced its support for cooperation to stabilize prices on Monday. West Texas Intermediate crude was down 0.4% on Tuesday to $33.61 a barrel.

Stocks closed out their third straight month in decline on Monday with a late-day selloff wiping out marginal gains in the final hour. A health care selloff to begin the week led to broad losses across equity markets on Monday.

General Motors (GM - Get Report)  shares were on watch after missing February sales estimates by a wide margin. The Detroit automaker reported a 1.5% decrease in sales to 227,825 units. Consensus was for sales growth anywhere between 3% to 8%. 

United Technologies (UTX - Get Report) shares fell 3% after Honeywell (HON - Get Report) announced it was ending its attempt to acquire the industrials company. Honeywell said United Technologies had shown "unwillingness to engage in negotiations." United Technologies had said a potential acquisition would be met with intense regulatory scrutiny. 

Valeant Pharmaceuticals (VRX)  slid 4%, adding to a steep decline a day earlier after confirming it is under investigation by the Securities and Exchange Commission. The new investigation is separate from an ongoing one into its purchase of Salix Pharmaceuticals last year. The company was already lower on Monday after withdrawing its financial guidance.

Barclays (BCS) fell 7% after more than halving its dividend to 3 pence a share over the next two years. The bank also announced plans to sell parts of its 62% stake in Barclays Africa with the aim of separating it from its accounts in at least two years. The bank reported a far-wider loss in fiscal 2015 than a year earlier.

Autozone (AZO) shares jumped more than 1% as quarterly sales continued to rise and profit jumped 8% from a year earlier. The car parts retailer reported profit of $7.43 a share, above estimates of $7.28, while revenue rose 5.3% to $2.26 billion. Sales at domestic stores climbed 3.6%.

Dollar Tree (DLTR - Get Report) fell after reporting disappointing sales growth. The discount retailer more than doubled its sales to $5.27 billion, though that came in below estimates of $5.41 billion. The company expects first-quarter earnings between 75 cents and 83 cents a share, on the low-side compared to consensus of 83 cents.

Marathon Oil (MRO - Get Report) slumped after unveiling a new share offering of 135 million common shares, plus an underwriters' option worth up to 20.25 million shares. The oil company plans to use proceeds to bolster its balance sheet. Oil companies have been struggling in a tough commodities market with major miner BHP Billiton (BHP) and NRG Energy (NRG - Get Report) cutting their dividends in recent days.

Intercontinental Exchange (ICE - Get Report) shares were on watch after it said it was considering an offer for the London Stock Exchange Group, only days after news of a possible $28 billion merger with Deutsche Böerse. ICE, which owns the New York Stock Exchange, has yet to make a decision as to whether it will pursue an offer.