Updated from 4:05 p.m. EDT

Stocks rallied sharply Thursday, as strong earnings were able to push the market through levels seen before Fed Chairman Alan Greenspan confirmed earlier this week that higher interest rates are on the way.

The major indices posted their biggest one-day point-gain in almost a month, with the Dow Jones Industrial Average closing up 143.93 points, or 1.4%, to 10,461.20. The Nasdaq finished up 37.28 points, or 1.87%, to 2032.91; and the S&P 500 was up 15.86 points, or 1.41%, to 1139.95. The 10-year Treasury note was trading up 10/32 in price to yield 4.38%, while the dollar dropped against the euro and climbed against the yen.

Volume on the New York Stock Exchange exceeded 1.8 billion shares, and advancers outnumbered decliners by about 7 to 2. On the Nasdaq, over 2.1 billion shares changed hands, and advancers outpaced decliners by about 2 to 1.

Momentum was provided by oil-service stocks, with the Oil Services Index up 3.2%. The Amex Airline Index rose 3.7% on its third straight day of gains. Also, software stocks, forest products and biotechnology showed particular strength, but the market boasted gains across the board.

Joe Veranth, executive vice president at Dana Investments, said the strong earnings season is finally having its desired effect. "We've seen a lot of positive earnings surprises, and people are starting to see that companies are overdelivering on expectations," he said. "Also, Greenspan's measured response to inflation concerns was positive for the stock market. As long as the market believes that the Fed is going to do what it takes to keep inflation under control, that's a good thing for stocks in the end.

"We do expect a couple of Fed rate moves this year, even before the November election," he added.

Collin Monsarrat, a trader at Birinyi Associates, said a simultaneous rise in stock and bond prices, which normally maintain an inverse relationship, supports his view that the market's gains were more of a technical bounce from the oversold condition the markets had reached than anything else. "I think a lot of traders might be stepping in to look for a quick buck here," he said.

Action was choppy in the first 90 minutes of trading, but the rally picked up steam as the major indices crossed their 50-day simple moving averages.

To that end, the markets are essentially at the levels they started at when Greenspan began his first day of testimony on Tuesday at 2:30 p.m. EDT. Richard Dickson, senior strategist at Lowry's Reports, said the market is still well within a trading range that has contained the markets since the major indices hit their mid-March lows and then rallied to highs in early April. "If you're going to accomplish anything other than some more noise in the market, or if you're going to talk about re-establishing an uptrend, you've got to get above those recovery highs."

Dickson said the current trading range tops out at about 10,570 on the Dow, 1150 on the S&P, and 2080 on the Nasdaq. "This has been a very frustrating market for both bulls and bears," he added. We haven't been able to sustain a move either up or down. You have to get some follow-though with some good demand behind it to really re-establish any kind of uptrend, and that's been a hallmark of the market since the beginning of the year. You have not had any sustainability in either supply or demand."

Thursday morning's big earnings included Caterpillar ( CAT), which said first-quarter earnings tripled and blew away estimates. It earned $412 million, or $1.16 a share, up from last year's $129 million, or 37 cents a share. Analysts were predicting earnings of 70 cents a share. Its shares closed up $3.02, or 3.7%, to $84.10.

AT&T ( ATT) said first-quarter net income fell 47% amid fierce competition in the telecommunications market. It earned $304 million, or 38 cents a share, down from $571 million, or 73 cents a share, in the same quarter last year. Its shares closed 56 cents, or 3%, to $18.03.

Merck ( MRK) reported a 5.3% drop in first-quarter net income, but beat Wall Street's consensus estimate by a penny and reaffirmed its full-year guidance. The drugmaker said it earned $1.62 billion, or 73 cents a share, down from last year's $1.71 billion, or 76 cents a share. Its shares ended up 24 cents, or 0.5%, to $46.74.

Viacom ( VIAB) said its first-quarter net income was $711 million, or 41 cents a share, up from $443 million, or 25 cents a share, one year earlier. Excluding a tax gain, Viacom earned $570 million, or 33 cents per share. The First Call forecast was for 31 cents a share. Its shares closed down 13 cents, or 0.3%, to $41.02.

KLA-Tencor ( KLAC) beat estimates for its third quarter but lowered its full-year guidance. Its stock closed down $2.18, or 4.5%, to $46.14.

Newly added Dow component American International Group ( AIG) said it earned $2.66 billion, or $1.01 a share, in the first quarter compared with $1.95 billion, or 74 cents per share, a year earlier. Excluding various items, AIG earned $1.08 a share, 2 cents better than forecasts. Its shares finished up 50 cents, or 0.7%, to $73.70.

The session also received a boost from eBay's ( EBAY) results, reported after Wednesday's closing bell. The Internet auctioneer said its quarterly profits nearly doubled. Its stock finished up $7.81, or 10.4%, to $82.59.

Before the rally took hold, investors seemed to be again weighing strong earnings against economic data that once again raised concerns of inflation. The government said the producer price index gained 0.5% in March, compared with a 0.1% jump in February, lending credence to inflation concerns of late. Economists expected the index would rise only 0.3%. Excluding food and energy prices, the so-called core index increased 0.2%, up from Wall Street's consensus estimate of 1%.

Meanwhile, initial unemployment claims declined less than expected in the week ended April 17, totaling 353,000 compared with the previous week's revised 362,000. Economists had predicted claims would drop to 340,000.

After Thursday's closing bell, Microsoft ( MSFT) said third-quarter net income excluding charges handily beat the consensus estimates, while the software giant also guided second-quarter results above Wall Street's prediction.

Also, Amazon ( AMZN) swung to a profit in its first quarter as the online retailer's aggressive pricing and free-shipping incentives boosted sales. It earned $111 million, or 26 cents a share, compared with last year's loss of $10 million, or 3 cents a share. Shares were down 1.4% in after-hours trading after gaining $3.14, or 6.9%, to $48.86 during the day's session.

Before Friday's opening bell, first-quarter earnings announcements are due from more than 20 companies, including Ericsson ( ERICY), expected to swing to a profit of 15 cents a share; International Paper ( IP), expected to match last year's earnings of 14 cents a share; Schlumberger ( SLB), expected to earn 27 cents a share, up from last year's 26 cents a share; Weyerhaeuser ( WY), expected to report earnings of 56 cents a share, up from last year's 19 cents a share; and Xerox ( XRX), expected to say it earned 15 cents a share, up from last year's 13 cents a share.

Also, a report on durable goods orders in March will hit the airwaves at 8:30 a.m. EDT. Economists have produced an average estimate that orders rose 0.7%, down from the 2.5% jump reported in February.

In overseas markets, London's FTSE 100 closed up 0.7% at 4572, and Germany's Xetra DAX jumped 0.8% to 4059. In Asia, Japan's Nikkei was down 0.5% to 12,168, while Hong Kong's Hang Seng was up 0.3% to 11,980.