NEW YORK (CNN/Money) - Stocks rallied Tuesday, recovering from a big selloff, as Fed comments hinting that the central bank won't need to speed the pace of rate hikes cooled inflation worries on Wall Street.

Treasury bonds also rallied, pushing yields lower, while the dollar stayed higher versus the euro, but turned weaker versus the yen. Oil prices slumped.

The Dow Jones industrial average (up 59.41 to 10,507.97, Charts) and the broader Standard & Poor's 500 (up 6.55 to 1,187.76, Charts) index both gained almost 0.6 percent.

The tech-heavy Nasdaq composite (up 13.28 to 2,005.40, Charts) rose 0.7 percent.

All three major gauges had been down nearly 1 percent earlier in the day before the release of minutes from the Fed's last meeting on March 22.

The record U.S. trade gap report got the stock market off to a bad start, and that accelerated as the session wore on.

But the mild Fed minutes helped, and stocks were able to recover and then move higher in the afternoon.

For Tuesday's stock movers, click here.

Despite Wall Street's reaction to the minutes Tuesday, worries about inflation and how rising energy prices will hurt the economy remain on the front burner for stocks, economists say.

The March retail sales report is due Wednesday. Sales are expected to have risen 0.8 percent in March after rising 0.5 percent in February, according to a consensus of economists surveyed by Briefing.com. Sales excluding autos are expected to have risen 0.5 percent in the month after rising 0.4 percent last month.

For more on earnings, click here.

In the minutes, released mid-afternoon, the central bank acknowledged that while rates may need to increase further overall, there was probably no need to start hiking rates faster now. The central bank also reiterated that its policy-makers see inflation pressures contained for now. (To read the minutes, click here.)

The stock and bond market rallies were a sigh of relief by investors that the Fed probably won't get more aggressive on rate hikes, at least for now, said Joshua Shapiro, chief economist at Maria Fiorini Ramirez, Inc.

"People were expecting the worst and I think the reaction you saw is that it wasn't as Draconian as many had feared," Shapiro added. "There wasn't any real hard table pounding or anything in the minutes that pointed to a 50-basic point hike at the next meeting."

There are 100 basis points in a percentage point.

At the last meeting, the central bank raised its short-term rate target a quarter-percentage point to 2.75 percent, the seventh straight increase, and said pricing pressures had picked up.

After a slow start last week, the earnings reporting period heats up in earnest this week. Roughly 31 companies, or 6 percent of the S&P 500, are due to report results this week. Earnings are expected to have risen 8.3 percent from the first quarter of 2004, according to a consensus of analysts surveyed by First Call.

That's down from the more than 20 percent year-over-year growth clocked in the fourth-quarter of 2004.

"The expectation is that earnings growth is slowing, so any kind of improved earnings would help," said John Hughes, market analyst at Shields & Co.

Foundry Networks (Research) warned after the close that first-quarter earnings and revenue will miss forecasts due to a slowdown in orders from the Federal Government and weaker sales to its other North American business customers. The network equipment and services maker fell 7.5 percent in after-hours trade.

Apple Computer and Advanced Micro Devices are due to report results after Wednesday's close. On Friday, Dow components Citigroup and General Electric are due.

"I think GE and Citigroup could help lift the market if they say something positive," Hughes added.

The U.S. trade gap grew to a record $61 billion in February from an upwardly revised $58.5 billion in January, the government said Tuesday. The difference between the nation's imports and exports was expected to rise to $59 billion in the month, according to economists surveyed by Briefing.com.

That initially sent bond prices lower, and yields higher. The report also initially inspired a knee-jerk selloff in the dollar. But investors seemed to come to terms with the report, even before the Fed meeting, as Treasury bonds stabilized and the dollar turned higher.

But Treasury prices rallied after the Fed minutes, sending the yield on the 10-year note down to 4.36 percent from 4.43 percent late Monday. Treasury prices and yields move in opposite directions.

In currency trading, the dollar held its gains versus the euro and turned flat versus the yen.

U.S. light crude oil for May delivery sank $1.85 to settle at $51.86 a barrel on the New York Mercantile Exchange. The trading high for an active contract of $58.28 was hit a week ago.

Gains were broad-based, with 24 out of 30 Dow issues rising.

A variety of economically-sensitive shares rose, including home builders, financials and others.

The Philadelphia Housing Sector (Charts) index rose 2.7 percent and the Philadelphia Bank Sector (Charts) index rose 1.2 percent.

Tech also recovered some from earlier losses, with gains in software leading the way. Biotech also gained, giving support to the Nasdaq.

The Goldman Sachs Software (Charts) index rose 0.7 percent and the Amex Biotechnology (Charts) index rose more than 1 percent.

In addition, companies facing asbestos liability lawsuits rose on reports bipartisan Senate support was likely in place for a $140 billion U.S. fund to compensate victims.

W.R. Grace & Co. (up $2.59 to $10.63, Research) and USG (up $8.63 to $43.90, Research) both rallied.

On the downside, the more than 3 percent slide in commodity prices dragged down energy stocks. The Philadelphia Oil Services (down $2.69 to $137.30, Research) index lost 1.9 percent.

Ford Motor (down $0.38 to $10.06, Research) lost another 3.6 percent following its announcement late Friday that 2005 earnings would miss estimates due to ongoing weakness in the auto sector.

eBay (down $0.31 to $33.66, Research) slid for the second session in a row after Standard & Poor's reiterated its "hold" rating on the online retailer Monday and cut its 12-month price target, saying the stock has weakened recently due to worries about the company's upcoming first-quarter earnings.

Genentech (Research) gained after reporting quarterly earnings of 29 cents a share late Monday, four cents more than expected and up from 19 cents a year earlier. The biotech also forecast that 2005 earnings would grow 30 percent, versus earlier forecasts for growth of 25 percent.

Power tools maker Black & Decker (up $7.99 to $87.66, Research) rallied more than 10 percent after boosting its first-quarter and fiscal-year 2005 earnings forecast, due to strong sales, particularly in North America.

Market breadth was positive. On the New York Stock Exchange, advancers beat decliners five to three on volume of 1.57 billion shares. On the Nasdaq, winners beat losers eight to seven on volume of 1.93 billion shares.

COMEX gold lost $1.10 to settle at $429.30 an ounce, falling with other dollar-traded commodities.