NEW YORK (CNN/Money) - The Nasdaq rallied Tuesday after Federal Reserve Chairman Alan Greenspan said economic growth is solid and that inflation poses no threat to the recovery.

The technology-laden Nasdaq composite (up 33.24 to 1,917.07, Charts) index rose about 1.76 percent. The Dow Jones industrial average (up 55.01 to 10,149.07, Charts) and Standard & Poor's 500 index (up 7.77 to 1,108.67, Charts) crept 0.54 percent and 0.71 percent higher, respectively.

Stock buyers kept their spending in check earlier in the session while waiting for clues from Greenspan as to how far and how fast the central bank would raise rates. The Fed chief indicated during his semi-annual testimony before a Senate panel that the central bank is comfortable with raising rates "at a measured pace."

"Financial markets, along with households and businesses, seem to be reasonably well prepared to cope with a transition to a more neutral stance of monetary policy," Greenspan said. "Although many factors may affect inflation in the short-run, inflation in the long-run, it is important to remind ourselves, is a monetary phenomenon."

"As we attempt to assess and manage these risks, we need, as always, to be prepared for the unexpected and to respond promptly and flexibly as situations warrant," he added.

Investors seemed unfazed by the prospect of higher rates, instead seeing stronger growth as a reason to buy tech stocks.

"We didn't see any changes in his game plan and that is clearly good news for stocks at this juncture," said Art Hogan, chief market strategist for Jefferies & Co. Hogan added that techs were oversold going into the session and that it's not unusual for the sector to rally more than the broader market on good news.

Earnings news has dominated the headlines lately, but many investors have largely refrained from a summer stock shopping spree as much of the good news has already been priced in.

"The second quarter is lining up to be another good quarter but people are looking ahead to the third and fourth quarters," Hogan said. "Barring any major upsets on the earnings calendar I'd say the market is pretty range bound."

"It's distressing how slow it's been this particular summer season," he added. "We had a relatively quiet May. June was dreadfully slow, July is nothing to write home about." Hogan said that August, traditionally the slowest month of the year, may benefit from the cross draft of the Democratic and Republican national conventions and an early Google IPO.

Airline stocks were in focus Tuesday following earnings reports from Delta Air Lines and Continental Airlines.

J.P. Morgan cut its rating for Delta (DAL: down $0.54 to $5.40, Research, Estimates) to "neutral" a day after the Atlanta-based airline posted a $1.96 billion, or $15.79 per share, second-quarter loss. Its shares tumbled 9 percent.

Rival Continental (CAL: up $0.56 to $10.08, Research, Estimates) soared nearly 6 percent even as it posted a $17 million, or 26 cents-a-share, loss for the quarter. Before charges, the Houston-based carrier earned 3 cents a share for the quarter, besting analysts expectations for a 9 cents per share loss.

A solid second-quarter earnings report from Ford Motor Co. (F: down $0.38 to $14.60, Research, Estimates) didn't do much to help its shares, which fell by 2.5 percent as the No. 2 automaker's third-quarter and full-year earnings forecast disappointed investors.

Financial issues were also active, with Ameritrade (AMTD: up $1.32 to $10.71, Research, Estimates) surging 14 percent after posting a $62.3 million, or 15-cents-a-share, third-quarter profit versus $49.9 million, or 12 cents a share, a year-earlier.

Wells Fargo & Co. (WFC: down $0.39 to $58.06, Research, Estimates) ended less than one percent lower after its second-quarter profit missed analysts' estimates.

The San Francisco-based bank earned a $1.71 billion, or $1 a share, in the quarter compared to $1.53 billion, or 90 cents a share, a year earlier. Analysts, however, expected Wells Fargo to earn $1.03 a share for the quarter.

Charles Schwab Corp. (SCH: up $0.55 to $8.85, Research, Estimates) rallied 6.6 percent after the discount brokerage firm ousted David Pottruck as CEO and named its chairman and founder Charles Schwab to the top spot.

A report showing that housing starts slid to a 17-month low had scant effect on the session. The Commerce Department said housing starts fell to a seasonally adjusted rate of 1.802 million units for June, off from 1.97 million units in May, its biggest decline since February 2003.

Fewer building permits were issued in June, with that number falling to 1.924 million units from 2.097 million units in May, its steepest drop since February 1994, the federal agency reported.

Market breadth was mixed and trading was robust.

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On the New York Stock Exchange, advancing issues beat decliners by 19 to 13 as about 1.44 billion shares changed hands. On the Nasdaq, advancers trounced decliners by roughly two to one as about 1.59 billion shares traded.

Treasury prices eased, with the 10-year note falling 24/32 of a point in price to yield 4.44 percent, up sharply from 4.36 percent late Monday. Bond prices and yields move in opposite directions.

The dollar rose versus both the yen and the euro.

In the commodities markets, U.S. crude oil lost $1.00 to $40.44 a barrel on the New York Mercantile Exchange. COMEX gold lost $3.70 to $402.10 an ounce.

Asian markets finished lower as technology stocks tumbled, but European markets ended higher.