Relieved investors sent US stocks sharply higher yesterday after Russia pulled troops back from the border of Ukraine.
The rally pushed the Standard & Poor's 500 index to an all-time high, erasing steep losses from Monday, when investors feared that the confrontation between Russia and Ukraine would escalate or even lead to a war.
Traders were relieved when Russian president Vladimir Putin ordered troops participating in military exercises near Ukraine to return to their bases.
The S&P 500 rose 28.18 points, or 1.53%, to close at 1,873.91. It was the biggest gain for the benchmark index since October.
The Dow Jones industrial average rose 227.85 points, or 1.41%, to 16,395.88. The Nasdaq composite rose 74.67 points, or 1.75%, to 4,351.97.
As investors moved back to riskier assets, prices fell for safe-play investments like bonds and gold. Oil prices also fell as the immediate threat of economic sanctions on Russia, a major oil exporter, eased.
Traders had also been worried about transport disruptions in the Black Sea, a major transit point for oil. The yield on the 10-year Treasury note rose to 2.68% from 2.60% late on Monday.
In another sign of a greater appetite for risk, the Russell 2000 index of small-company stocks set another all-time high after posting the biggest percentage gains of the major US stock indexes.
The Russell jumped 32.29 points, or 2.7%, to 1,208.65. It is now up almost 3.9% this year.
The two-day rout and rally was just the latest twist in a volatile year for stocks, which fell almost 6% just last month and have since recovered to set all-time highs in recent days.
The conflict between Russia and Ukraine threatened to destabilise Europe and upset oil markets.
And it was not clear which countries might be drawn into the conflict if it got worse. Wall Street hates uncertainty, and yesterday that is all there was. So investors were relieved when Mr Putin appeared to back down yesterday.
"I think the reaction today is probably more hopeful than rational," said Brad McMillan, chief investment officer for Commonwealth Financial.
He noted that Mr Putin made his point with Ukraine just a week after the Sochi Olympics ended. Hosting the Olympics was a way for him to show that Russia was open for business, but the conflict with Ukraine threw that away, Mr McMillan said.
Stock markets in Europe, including Moscow, and Asia recouped much of Monday's losses. Indexes in France and Germany each rose 2.5%, and the FTSE 100 in Britain rose 1.7%.
The gains were extraordinarily broad. Five stocks rose for every one that fell on the New York Stock Exchange. All 10 industry sectors in the S&P 500 average rose.