Stocks closed higher Tuesday, boosted in part by an upgrade of the semiconductor sector and strong performance by pharmaceutical firms.

The Dow Jones industrial average ended higher 63.77 points, or 0.59 percent, at 10,830. The technology-laced Nasdaq Composite Index gained 19.53 points, or 0.95 percent, to end at 2,071.25, while the broader Standard & Poor's 500 index was up 6.81, or 0.57 percent, to end at 1,210.41.

"Nasdaq got its strength through the semiconductors, while the Dow and the S&P got a lot of strength through the prices-paid component of the ISM, which tempered a lot of the inflationary concerns that investors may have had," said Larry Peruzzi, equity trader at The Boston Co. Asset Management, a Mellon subsidiary.

Investment bank JPMorgan Chase & Co. upgraded its rating on the U.S. semiconductor sector, according to traders. The bank also raised its recommendations on shares of Intel Corp. (INTC) to "overweight." Intel gained 63 cents, or 2.63 percent, to $24.62.

The Philadelphia Stock Exchange semiconductor index a benchmark for chip stocks, rose 2.3 percent.

Merrill Lynch upgraded its rating on Johnson & Johnson (JNJ) shares to "buy" from "neutral" based on bullish sales expectations and "increased conviction" in earnings growth from the Guidant Corp. (GDT) acquisition. J&J rose $1.05, or 1.6 percent, to $66.65.

Pharmaceutical stocks were higher after Europe's Sanofi-Aventis SA , the world's third-largest drug maker, beat expectations with an 18 percent rise in its first year's post-merger net profit. Its shares listed in the United States (SNY) rose 2 percent, or 79 cents, to $40.70.

Biogen Idec (BIIB) was up 6.8 percent, or $2.61, to $41.26 after Smith Barney raised its ratings on Biogen and Elan Corp. Plc (ELN), saying Monday's market reaction to the withdrawal of the multiple sclerosis drug Tysabri was overdone.

Smith Barney raised Biogen to "buy" from "hold" and raised Elan to "hold" from "sell." Elan shares in the United States nudged down 3 cents to $7.97.

Economic news drove the markets higher early on in the session Tuesday. The Commerce Department reported construction spending climbed 0.7 percent in January, topping expectations, as both private and public construction hit record levels.

The Institute for Supply Management reported U.S. factory output grew more slowly in February as new orders and hiring intentions eased. The ISM manufacturing index's prices-paid component also fell. Those fearing inflation could see the report as good news, since a slide in demand for industrial goods bodes well for lower prices.

Construction put in place in January increased to a record $1.047 trillion annual rate, compared with an upwardly revised $1.040 trillion rate in December, the Commerce Department said.

A drop in oil prices helped feed buying in stocks, as investors hoped that crude futures would not pass $52 per barrel. A barrel of light crude was quoted at $51.60, down 15 cents, on the New York Mercantile Exchange (search).

"With oil lower, you're seeing the market move broader, moving out of energy stocks and into everything else," said Jay Suskind, head trader at Ryan Beck & Co. "Just across the board, there's a sense the market wants to move higher this spring."

Federal Reserve Chairman Alan Greenspan (search) is due to testify before the House Budget Committee on Wednesday. Closely watched monthly payrolls data are due out on Friday, which will give a reading on job growth and the unemployment rate for February.

In corporate news, Marsh & McLennan Cos. Inc. (MMC) gained 35 cents, or 1.07 percent, to $33 even after the embattled ensurer swung to a loss for the latest quarter due to cost cutting and a settlement with New York's attorney general for improper business practices. The company also said it would lay off up to 2,500 workers.

Caterpillar Inc. (CAT) also helped the Dow, rising 2.4 percent, or $2.32, to $97.37 after the heavy equipment maker said it will increase machinery and engine prices due to rising costs of steel and other raw materials.

BJ's Wholesale Club Inc. (BJ) said a lease accounting adjustment ate into its quarterly profits, which fell 4.4 percent from a year ago, but the discount retailer still managed to beat Wall Street expectations by 2 cents per share after one-time charges. BJ's climbed $2.63, or 8.6 percent, to $33.20.

Qwest Communications International Inc. (Q) continued to press its case for an $8 billion merger with MCI Inc. (MCIP), which has already agreed to a $6.7 million takeover by Verizon Communications Inc. (VZ) Qwest executives said up to 15,000 jobs would be cut in its proposal, more than double the job cuts projected in the Verizon deal. Qwest rose 15 cents to $4.05, while MCI gained 61 cents to $23.36; Verizon added 28 cents to $36.25.

Advancing issues outnumbered decliners by more than 3 to 2 on the New York Stock Exchange.

The Russell 2000 index of smaller companies was up 4.47, or 0.71 percent, at 638.53.

Overseas, Japan's Nikkei stock average rose 0.34 percent. In Europe, France's CAC-40 climbed 0.69 percent, Britain's FTSE 100 closed up 0.64 percent, and Germany's DAX index gained 0.76 percent.

Reuters and The Associated Press contributed to this report.