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Stocks surged Tuesday as investors' optimism grew for a new year’s early rally while eyeing economic data and corporate earnings coming later in the week.

The Dow Jones Industrial Average added 187.9 points, or 0.56%, to end at 33,705.55. The S&P 500 advanced 0.7%, while the Nasdaq Composite gained 1%.

The S&P 500 was up about 1.1% in the first five trading days of 2023 through Monday, which some say is a good indicator for the rest of the year. The Nasdaq has rallied in recent days as hopes over cooling inflation pushed investors to beaten-up technology stocks.

Billionaire investor Paul Tudor Jones said the Federal Reserve likely would not break the economy, halting rate hikes before it does so. Jones, who noted he wasn’t making a specific forecast, said there was a huge demand for stocks on the way this year due to share repurchases and mergers.

“You’ve probably got something just under a trillion dollars of excess demand in U.S. stocks,” Jones said Tuesday on CNBC’s “Squawk Box.” “Where is the selling going to come to offset that that demands coming from buybacks, from the corporate line items, from some combination of buybacks and M&A? That’s a significant amount. Ceteris paribus, everything being the same, the stock market would be up 7% or 8% this year.”

Investors feared the Fed rates could tip the economy into a recession. However, many are betting that inflation is cooling down. They will brace for consumer price index data coming Thursday and big bank earnings on Friday for any clues into the health of the economy or signals of how the Fed will move interest rates going forward.

“We’re going to probably be in this really tight range and most likely directionless until we get through at least Thursday with the CPI report and then the kickoff to earnings season, which is also later this week,” said Megan Horneman, chief investment officer at Verdence Capital Advisors. “Right now, I just think the market’s kind of caught in the middle of waiting for the economic data and absorbing some of the Fed speech.”