Updated from 4:21 p.m. EDT

Stocks closed higher Tuesday in a last-minute turnaround as investors managed to look past news of regulatory investigations into banks, the tech sector and lifestyle expert Martha Stewart.

The Dow Jones Industrial Average closed up 25 points, or 0.3%, to 8923. The Nasdaq advanced 13 points, or 0.8%, to 1604, and the S&P 500 rose almost 5 points, or 0.5%, to 972.

"Investors don't think the market will revisit its October lows. Most believe it will move up. The question remains how strong of a bull market this will be," said Ronald Hill, market strategist at Brown Brothers Harriman & Co. "This is a below-par bull market that started at high valuations. It's better than a bear market, but not as exciting as other bull markets."

Helping the Dow a little were shares of Honeywell International ( HON), which rose 35 cents, or 1.3%, at $26.75. The world's largest maker of aircraft-cockpit electronics was upgraded at Prudential Securities to a buy from a hold, on expectations next year's earnings will improve and profits will have a "major rebound" in 2005.

Shares of computer maker Hewlett-Packard ( HPQ) rose 2 cents to $20.07 after Chief Executive Carly Fiorina said the company can continue to see sales and earnings growth, despite a weak economy. The focus will be on increasing market share for H-P, she said at an analyst meeting in New York on Tuesday.

Advancers led decliners 5 to 4 at the New York Stock Exchange, and winners and losers were tied on the Nasdaq. Volume reached 1.4 billion at the Big Board and 2 billion at the tech market.

Elsewhere, Federal Reserve Chairman Alan Greenspan said there are still no signs the economy is growing. Speaking at the International Monetary Conference in Germany, Greenspan said that, despite an expected improvement in employment, income and consumer spending in the third quarter, "the acceleration in the economy has not yet begun."

The Fed chief believes that the economy is stabilizing and "there is some indication of return," according to media reports.

"There was some encouragement from Greenspan's comments, reaffirming his view that the economy will settle in a sustainable growth path," said Ronald Hill, market strategist at Brown Brothers Harriman. "But the market went up so fast in a short period of time, so I'm not surprised with the pause."

Treasuries were higher on the news, with the yield on the 10-year note down 8 basis points at 3.33%. Crude oil prices were lower in London. The dollar gained slightly against the euro and was weaker against the yen.

IBM ( IBM) shares were lower after the computer hardware and software maker said late Monday it is under investigation by the Securities and Exchange Commission for how the company accounted for sales booked in 2000 and 2001. IBM believes the probe stems from a separate investigation of its retail store solutions unit. Shares of IBM were down $3.51, or 4%, at $83.82.

Separately, U.S. regulators served subpoenas on the 10 firms that agreed to last month's $1.4 billion settlement related to tainted research, according to sources familiar with the investigation. The SEC wants to take a closer look at emails and other documents written by analysts' supervisors.

Word of another investigation came out before the opening bell. Martha Stewart Living Omnimedia ( MSO) said it has been informed that the U.S. Attorney's Office for the Southern District of New York has launched a criminal investigation against company founder Martha Stewart.

Additionally, the company has been told that a civil complaint by the SEC is also expected. Shares of the company were down $1.68, or 15%, at $9.52.

Shares of a few drugmakers were on the rise Tuesday as investors sought companies with steady growth prospects. Pfizer ( PFE) advanced 68 cents to $31.69 after The Wall Street Journal reported a new agent developed by the company may help patients with digestive tract cancer.

In other corporate news, FedEx ( FDX) said it will cut its workforce through a severance and early retirement program for which about 14,000 employees are eligible. Shares of FedEx dropped $1.62 to $62.99.

On the research front, Merrill Lynch upgraded Brocade Communications ( BRCD) to a buy rating, citing improvements in its rivalry against McData ( MCDT) and Cisco ( CSCO). Analysts also raised their sales and earnings estimates on Brocade for fiscal 2003 and 2004. Shares of Brocade were up $1.22, or 20%, to $7.26.

Shares of mobile-phone maker Nokia ( NOK) rose after the company was granted a license to manufacture and sell CDMA-based products in China. Shares gained 7 cents to $18.14.

Aon ( AOC), the world's second-largest insurance broker, predicts premium rates to gradually slow until the start of 2004, although insurance rates would rise within the next five to seven years. Aon shares were down 45 cents, or 1.7%, at $25.40.

Overseas markets were mixed, with London's FTSE 100 down 0.3% at 4115 and Germany's Xetra DAX moving 1% lower at 3032. In Asia, Japan's Nikkei closed 0.2% higher at 8564, while Hong Kong's Hang Seng ended with a gain of 0.3% at 9662.

On Monday, the Dow closed up 47.55 points, or 0.54%, to 8897. The S&P gained 3.41 points, or 0.35%, to 967, while the Nasdaq fell 5.16, or 0.32%, to 1590.

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