NEW YORK (CNN/Money) - Solid earnings from a few Dow components boosted U.S. stocks Tuesday, but an extension of the rally Wednesday will depend on what President Bush says in his annual State of the Union address this evening, particularly regarding Iraq and the economy.

Bush's State of the Union address to the nation is due to begin at 9:00 p.m. ET tonight.

Bush is expected to discuss the White House's views on the state of the economy, including his proposed stimulus plan, as well as the administration's plans for Iraq. Bush is expected to draw ties between Iraq and the al Qaeda terrorist organization as a means of garnering stronger support for military action.

In a long-term sense, "the market seems like it's rejecting [Bush's] policy. People are putting money into bonds, gold, just about everything but stocks," said Donald Selkin, director of research at Joseph Stevens. "Bush will reiterate his economic package tonight, but that's easier to sell. The real hang-up is the foreign policy case. If he's going to take a belligerent line, I don't think that's going to play in the market."

Wall Street has been losing ground for weeks and all three major market indicators are now in the red for the year, largely because of investors' misgivings over a possible war with Iraq and the effects it would have on the global economy. Of late, the seeming lack of support from a number of key allies has added to the concern. And the fact that the U.S. economy is showing few signs of improvement in its health hasn't helped either.

"I don't think anything has changed," said Bryan Piskorowski, market analyst at Prudential Securities. "The bigger picture is that the cloud covering from Iraq is not only holding back Wall Street, but Main Street."

The Federal Reserve began its two-day policy setting meeting Tuesday, and although hardly anyone on Wall Street expects interest rates to change, economists suspect the Fed could change its 'bias' -- or its view on where the economy is headed -- toward weakness, indicating that a rate cut could come sometime later this year.

Corporate earnings may also play a role in Wednesday's trade. After the close Tuesday, Novellus Systems (NVLS: Research, Estimates) reported better-than-expected fourth-quarter results and raised its forecast for the first quarter. Investors will learn of Dial (DL: Research, Estimates) and Verizon's (VZ: Research, Estimates) results before the opening of trade Wednesday and AOL Time Warner (AOL: Research, Estimates) and Gateway's (GTW: Research, Estimates) earnings after the close.

On Tuesday, the Dow Jones industrial average (up 99.28 to 8088.84, Charts), S&P 500 index (up 11.06 to 858.54, Charts) and the Nasdaq composite (up 16.91 to 1342.18, Charts) all gained a little more than 1 percent.

The Dow surged on the back of earnings from components Merck and Procter & Gamble. Both companies reported improved profit from the year-earlier period. But the day's rally arrived only after much hemming and hawing throughout the session, and on volume that was solid but not exceptionally strong. However, buying action was stymied by anticipation ahead of Bush's speech.

Although the period of reporting quarterly results is winding down, a number of influential companies are still offering their results. Tuesday brought earnings from four of the 11 Dow components scheduled to report this week.

Of the day's newsmakers, shares of Merck (MRK: up $2.64 to $54.40, Research, Estimates) gained more than 5 percent after the company reported improved quarterly earnings that met estimates. The company also raised its forecast for 2003.

Fellow Dow component Procter & Gamble (PG: up $1.95 to $85.00, Research, Estimates) gained 2 percent after the firm reported improved profit over the year-earlier quarter and edged estimates.

But SBC Communications (SBC: down $0.53 to $24.32, Research, Estimates), another Dow stock, fell 2 percent after the company predicted a revenue decline for 2003, blaming loss of telephone access lines to its rivals. SBC also reported earnings that matched what analysts had expected.

And American Express (AXP: up $1.60 to $35.02, Research, Estimates), also a Dow member, gained almost 5 percent. The financial services company reported a quarterly profit of 52 cents per share Monday, more than twice what it earned a year earlier and a penny better than expected.

Although not reporting news of its own, Dow stock Honeywell (HON: up $1.07 to $23.47, Research, Estimates) rallied nearly 5 percent, after fellow defense company Northrop Grumman (NOC: up $3.47 to $91.86, Research, Estimates) reported higher quarterly earnings thanks to aggressive acquisitions.

Xerox (XRX: up $1.40 to $9.45, Research, Estimates) surged 17 percent and was the New York Stock Exchange's second most actively traded issue after the copier maker reported a profit of 24 cents per share, 8 cents better than expected, thanks to cost-cutting and improved demand for its products. The troubled company has been restructuring amid questions about its accounting practices.

The day also offered a spate of economic reports, including readings on durable goods orders, consumer confidence and new home sales in December. The data, which came in mixed, did little to move the market.

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners 5 to 3 as 1.44 billion shares changed hands. On the Nasdaq, winners beat losers almost 5 to 3 as 1.38 billion shares traded.

Bond prices closed little changed, with the yield on the 10-year note at 3.97 percent. The dollar was little changed against the euro and a little higher versus the yen.

In key commodities markets, light crude oil rose 38 cents to $32.67 a barrel in New York. Gold gained 60 cents to $371.10 an ounce in New York.