A smaller-than-expected decline in existing home sales also helped lift markets.
The Dow Jones industrial average (INDU) rose 110 points, or 0.9%, with 26 of the blue-chip index's 30 components moving higher.
The S&P 500 (SPX) added 17 points, or 1.3%, and the tech-heavy Nasdaq Composite (COMP) jumped 58 points, or 2.2%.
Traders remain heavily focused on Greece's vote of confidence, to be held by the Greek parliament after the U.S. markets close. The vote is expected to determine whether Papandreou's government has the strength to avoid a default and secure a rescue package.
"There's a lot riding on this vote," said Marc Pado, chief investment strategist with Cantor Fitzgerald. "Greece is only a small part of the European debt crisis, particularly since banks across Europe hold a lot of the debt."
Investors expect Papandreou to win the vote, said David Levy, portfolio manager at Kenjol Capital Management. He thinks the markets will likely enjoy a relief rally.
"Greece is not coming off the front pages anytime soon," Levy said. "But seeing how officials handle the Greek situation will serve as a guide for how other countries that come into trouble down the road will be dealt with, and that gives investors some certainty."
Investors are also looking ahead to the conclusion of the Federal Reserve's two-day meeting Wednesday afternoon.
"Everyone knows QE2 is ending later this month, and that we're not getting a QE3, but investors will be looking for some guidance from the Fed on where to go from here," Levy said.
The dollar lost ground against the euro, the Japanese yen and the British pound.
Oil for July delivery settled up 14 cents to $93.40 a barrel.
The recent decline in oil prices will provide an additional and needed boost to the U.S. economy once those lower oil prices are passed along to consumers, Cantor Fitzgerald's Pado said. He expects that to happen in a few weeks.
Gold futures for August delivery rose $4.40 to $1,546.40 an ounce.
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