NEW YORK (CNN/Money) - Stocks bounced back Tuesday as investors found encouraging news in reports pointing to mild inflation.

Brokerage upgrades for a pair of Dow stocks, and a bounce after Monday's selloff factored in as well.

The Nasdaq composite (up 19.53 to 2,071.25, Charts) rose nearly 1 percent.

The Dow Jones industrial average (up 63.77 to 10,830.00, Charts) and the broader Standard & Poor's 500 (up 6.81 to 1,210.41, Charts) index both posted gains of around 0.6 percent.

Mixed economic news seemed to cool some of the inflation worries that helped spark Monday's sell-off. The numbers included a weaker-than-expected reading on manufacturing in February and solid construction spending numbers for January.

The Institute for Supply Management's manufacturing index fell to 55.3 in February from 56.4 in January. Economists surveyed by Briefing.com thought it would increase to 57 in February.

A separate report showed that construction spending rose 0.7 percent in February after gaining an upwardly revised 1.2 percent in January. Economists thought it would be up 0.4 percent.

"I think some of the economic news that came out today gave people a sense that the economy isn't overheating," said John Forelli, portfolio manager at Independence Investments. "Worries about that had weighed on stocks of late, and certainly the bond market has indicated that."

Treasury prices stabilized after Monday's big sell-off, with the yield on the 10-year note slipping to 4.37 percent from 4.38 percent Monday. The 4.38 percent Monday was the highest yield since Dec. 2, reflecting growing jitters about inflation and rising interest rates.

After the close, Novellus Systems (Research) issued its mid-quarter update. The chip gear maker boosted its first-quarter revenue forecast, but also warned of lower profit margins. The stock lost one percent, after initially falling four percent after the news was released.

Tuesday's reports came a day after investors worried about signs of inflation in a key manufacturing survey, the Chicago PMI. Monday's sell-off capped a mixed month that saw the Dow industrials and S&P 500 manage gains, but the tech-fueled Nasdaq decline.

Inflation means rising interest rates, which tend to slow economic growth, hurting corporate profits and ultimately stock prices.

"Generally, we're going to remain rangebound," said Peter Cardillo, chief market analyst at S.W. Bach & Co., "as investors scrutinize each new piece of economic news for guidance on how hawkish the Fed is going to be with interest rates."

The Fed has raised rates six times starting last June, and some investors are worried the central bank may be set to get more aggressive in a bid to ward off inflation.

While no notable economic reports are due Wednesday, Federal Reserve Chairman Alan Greenspan is due to speak before the House Budget Committee.

Key reports due later in the week include revisions to third-quarter productivity and February consumer sentiment, as well as the monthly job report, expected to show higher payroll growth versus recent months.

Upgrades of Dow components Intel and Johnson & Johnson added to the positive sentiment.

Intel (up $0.63 to $24.62, Research) rose 2.6 percent after J.P. Morgan Chase upgraded the tech leader to "overweight," according to Reuters, as part of a broader, positive read on the chip sector.

The Philadelphia Semiconductor (up 9.82 to 447.05, Charts) index, which gauges the major chip and chip gear makers, rose around 2.25 percent.

Johnson & Johnson (up $1.05 to $66.65, Research) shares gained 1.6 percent after Merrill Lynch upgraded the stock to "buy" from "neutral," due to stronger sales expectations and bets that the recent Guidant acquisition will help boost earnings.

General Motors (up $0.33 to $35.98, Research) rose and shares of Ford Motor (up $0.02 to $12.67, Research) were little changed, even after the automakers reported disappointing U.S. vehicle sales for February, and lowered their second-quarter production targets.

U.S. light crude oil for April delivery fell 7 cents to settle at $51.68 a barrel on the New York Mercantile Exchange after falling more than $1 a barrel earlier.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than five to three on volume of 1.70 billion shares. On the Nasdaq, advancers topped decliners by three to two on volume of 1.93 billion shares.

In currency trading, the dollar gained versus the euro and fell versus the yen.

COMEX gold tumbled $3.70 to settle at $433.90 an ounce.

In global trade, Asian-Pacific stocks ended mixed and European shares ended mostly higher.