Tuesday's advances were in addition to the significant rallies recorded in the prior two sessions. The Dow and S&P 500 each climbed more than 1% on Monday, while the Nasdaq advanced 0.9%. The Dow gained more than 700 points on Friday.

Stocks closed higher for a second day on Tuesday, as investors analyzed dropping rates and new data for more clues about the strength of the US economy. The Dow Jones Industrial Average finished 337.12 points higher, or approximately 1.1% higher, at 31,836.74. The S&P 500 rose 1.6% to 3,859.11. The Nasdaq Composite increased 2.2% to 11,199.12.

Bond yields have fallen, which has helped the recent advances. The benchmark 10-year Treasury note yield was last down roughly 15 basis points at 4.087%. The yield on the 2-year Treasury note was last roughly 3 basis points lower, at 4.473%.

The yield and major index swings, taken combined, indicate that investors are "doubling down on expectations of an easier Fed," according to Cliff Hodge, chief investment officer at Cornerstone Wealth. As per Hodge, economic data released on Tuesday provides promise for investors hoping for the Federal Reserve to shift course on interest rate hikes as the central bank attempts to contain inflation.

Home prices dropped 1.3% month over month in the 20 core cities surveyed in August, according to the S&P CoreLogic Case-Shiller 20-City House Price Index, which was issued on Tuesday. Despite this, prices were still 13.1% higher than they were a year earlier. After two months of the economy's outlook improving, the Consumer Confidence Index also declined, indicating that people's opinions have deteriorated.

"It's a rainbow after a pretty big storm," Paul Zemsky, the chief investment officer of multi-asset strategies and solutions at Voya Investment Management said, referring to Tuesday's bond moves and inflation data. "We're seeing enough slowing in the economy that we don't have to worry about the Fed really raising rates beyond what's already priced."

"I think we're finally getting to the place where the market has priced in the right amount of Fed tightening," he added. "Once you do that, the uncertainty in the market falls and we could see higher prices."

Businesses have shown so far this season that they might be doing better than expected. According to FactSet data, 71% of the companies that reported through Tuesday morning outperformed analyst forecasts for earnings per share. Wall Street is keeping a watch on the quarterly results of Big Tech. Results from Microsoft and Alphabet are released on Tuesday after the bell.

Any changes are likely to influence the market going forward given their size and market capitalization.