NEW YORK (CNN/Money) - Stocks rallied to a higher close Tuesday, driven by positive earnings reports, false fears of terrorism and President Bush's support for another term for Federal Reserve Chairman Alan Greenspan.

The Dow Jones industrial average (up 156.09 to 8484.99, Charts) and the Nasdaq composite (up 26.99 to 1451.36, Charts) each logged gains of 1.9 percent, while the S&P 500 index (up 19.36 to 911.37, Charts) chalked up a rise of 2.2 percent. The rally brought the Nasdaq and the S&P 500 to levels not seen since mid-January. The Dow is at its highest level in more than a month.

"It's been all rumor and innuendo for the most part," said Bryan Piskorowski, market analyst at Prudential Financial. "People are trading this. A lot of people have already positioned for what they think will be the next move.... It's nice to see a little bit of livelier action."

Stocks moved higher after it was confirmed by Homeland Security officials that a suspicious powder found at a Tacoma, Wash., mail facility was non-toxic. An initial test had shown the substance could be a toxin that causes botulism or plague, which caused a brief bout of terrorism fear in the market.

Around midday, President Bush said he would endorse Alan Greenspan for another term as chairman of the Federal Reserve, saying Greenspan has done a good job with the economy. The news appeared to give traders some relief because many in the market think they are familiar and, therefore, comfortable with, Greenspan's thinking on the economy and interest rates.

Also holding investors' attention was a mixed group of earnings reports. Roughly a third of the S&P 500 companies are slated to release their quarterly results this week, and Tuesday brought in a batch of reports from a variety of telecom, drug and defense firms.

Earnings likely will be at the top of investors' minds again Wednesday, as several bellwethers plan to report their quarterly results.

AOL Time Warner (AOL: up $0.41 to $13.31, Research, Estimates), parent company of CNN/Money, is expected to post a profit of 11 cents a share, down from 18 cents in the same period last year.

Dow components AT&T, Eastman Kodak and Boeing are also on the docket for profit results. Wall Street analysts, on average, expect the first-quarter profit of telecom company AT&T (T: down $0.10 to $13.81, Research, Estimates) rose to 52 cents a share from 30 cents in the previous year, according to tracking firm First Call.

Analysts, on average, forecast aircraft maker Boeing (BA: up $1.02 to $27.80, Research, Estimates) to post earnings of 33 cents a share, down from 75 cents in the same period last year. Meanwhile, analysts following Eastman Kodak (EK: up $0.33 to $31.65, Research, Estimates) expect the photography company's earnings to rise to 14 cents a share from 13 cents in the prior-year period.

After the closing bell, online auctioneer eBay (EBAY: down $1.53 to $89.22, Research, Estimates) posted first-quarter net earnings of 32 cents a share, better than the 17 cents it earned in same quarter last year. Excluding merger-related costs and amortization of stock-based compensation, the company earned 36 cents a share, 5 cents better than analysts' average expectation, according to First Call.

The company also raised guidance for second-quarter and full-year profits.

"We're seeing better earnings, and that's making people more enthusiastic," said Angel Mata, head of equity trading at Legg Mason. "But programs have been skewed to the buy side. To be honest, this is probably not sustainable."

Investors clearly disliked what they heard from the already battered telecom sector, punishing shares of Sprint (FON: down $0.59 to $10.68, Research, Estimates) and its offshoot Sprint PCS (PCS: down $0.75 to $3.71, Research, Estimates). Sprint lost 5.1 percent after it reported lower-than-expected revenues and earnings that grew only due to cost-cutting measures.

Sprint PCS fared worse, reporting a quarterly loss that was bigger than a year earlier. Revenue at the unit rose slightly, however. The stock tumbled 17 percent.

But Verizon Communications (VZ: up $0.82 to $33.99, Research, Estimates) saw its shares advance 2.5 percent after it reported earnings that met expectations and reaffirmed its outlook for the rest of the year.

In the pharmaceutical corner, Pfizer (PFE: up $0.22 to $31.82, Research, Estimates) saw its shares rise 0.7 percent after it reported a first-quarter profit that more than doubled from a year earlier. Eli Lilly (LLY: up $1.82 to $61.29, Research, Estimates) reported earnings of 61 cents a share, 3 cents better than expected but a bit lower its year-earlier earnings, due to job-cut related charges. Its stock edged up 3.1 percent.

Meanwhile, some defense contractors provided a lift to the broader market, after posting positive numbers for the quarter.

Lockheed Martin (LMT: up $3.30 to $48.55, Research, Estimates) shares jumped 7.3 percent after the company posted a better-than-expected first-quarter profit, citing strength in its jet fighter business. The company also raised its forecast for the year.

L-3 (LLL: up $2.63 to $42.80, Research, Estimates), which makes bomb detectors for airports in addition to other defense items, reported quarterly earnings of 50 cents a share, better than the same period last year and beating Wall Street forecasts by 3 cents. Shares of L-3 jumped 6.6 percent.

Shares of Raytheon (RTN: up $0.92 to $29.75, Research, Estimates) also gained 3.2 percent after the company posted an operating profit that beat analysts' average estimate by a penny but slipped from the year-earlier period.

Market breadth was positive. Three stocks rose for every one that fell on the New York Stock Exchange, where volume stood at 1.6 billion shares. On the Nasdaq, winners beat losers two to one, with some 1.6 billion shares changing hands.

U.S. Treasury bonds trended slightly higher. The 10-year note rose 1/32 of a point in price, with its yield falling to 3.98 percent. The dollar fell against both the euro and the yen.

Among key commodities, light sweet crude futures fell 84 cents to $27.99 a barrel in New York. Gold gained 90 cents an ounce to $334.80 in New York.

Overseas, stock markets in Europe reopened for business after a long weekend and ended the day mixed. Asian and Pacific markets closed lower, with Australia and Singapore being the only exceptions.