Stocks rose more than 1 percent on Tuesday on renewed hopes for a global economic recovery after the Australian central bank raised interest rates and in anticipation of the start of an improved U.S. earnings season.

The U.S. dollar fell against a basket of currencies, further lifting commodity prices and giving another boost to equities. The U.S. dollar index <.DXY> shed 0.5 percent.

The rise in commodity prices lifted shares in the basic materials sector. Alcoa Inc gained 3.4 percent to $13.87, while Caterpillar Inc , the world's largest maker of earth-moving equipment, added 1.6 percent to $51.57 and was the top boost to the Dow industrials.

Benchmark U.S. gold futures rose to an all-time high of $1,038.00 an ounce, also on the back of a weak dollar. Freeport-McMoRan Copper & Gold Inc shot up 3.7 percent to $69.81.

I'm encouraged a commodity-exporting country is sensing enough economic activity to raise rates, said Jack Ablin, chief investment officer at Harris Private Bank in Chicago, referring to Australia.

He said the reaction on Wall Street is a matter of (the rate rise) being an indicator of global growth, and adding to investor enthusiasm.

The Dow Jones industrial average <.DJI> added 110.11 points, or 1.15 percent, to 9,709.86. The Standard & Poor's 500 Index <.SPX> gained 13.90 points, or 1.34 percent, to 1,054.36. The Nasdaq Composite Index <.IXIC> rose 29.36 points, or 1.42 percent, to 2,097.51.

Australia's central bank raised its key cash rate by 25 basis points to 3.25 percent, saying it was safe to pull back on stimulus spending. It is the first G20 central bank to raise rates.

Ahead of the start of the earnings season that unofficially kicks off with Alcoa on Wednesday, equity strategist Peter Boockvar was guardedly optimistic about corporate earnings.

Boockvar, of New York-based Miller Tabak & Co, said, There's a thought that revenue will be okay, but it depends on where you do business. If you have exposure overseas, revenue growth may be easier to come by.

Global semiconductor revenue could increase about 10 percent next year after two years of declines as new computers and smartphones boost chip demand, according to research firm Gartner. The PHLX semiconductor index <.SOXX> rose nearly 2 percent.

St. Jude Medical Inc tumbled 11.7 percent to $33.76 on expectations that quarterly profits would miss its previous forecasts as hospitals buy fewer of its medical devices.

(Reporting by Rodrigo Campos; editing by Jeffrey Benkoe)

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