The S&P 500 climbed on Tuesday as investors parsed the first of several key economic data releases this week for clues about the Federal Reserve's interest-rate trajectory. Market participants are closely watching incoming data after recent inflation readings suggested cooling price pressures.

Traders are positioning for potential rate cuts as economic indicators point to slowing growth. The Fed's next moves have become a central focus for Wall Street, with futures markets pricing in multiple reductions by year-end. This shift in monetary policy expectations has buoyed equity markets.

US stocks extended gains as the prospect of looser monetary policy outweighed concerns about economic weakness. The data-driven approach to Fed policy means each economic release carries heightened significance for market direction. Investors appear willing to accept softer economic numbers if they increase the likelihood of accommodative Fed action.