NEW YORK ( TheStreet) -- Stocks finished solidly higher Tuesday as above-consensus earnings reports helped investors move past the latest evidence that more monetary stimulus is unlikely from Federal Reserve this summer.

After initially swooning in the wake of Chairman Ben Bernanke's downbeat appearance before Congress, all three major U.S. equity averages rallied into positive territory with defensive stocks leading the way.

The Dow Jones Industrial Average jumped 78 points, or 0.61%, to close at 12,805, bouncing 160 points off a session-low of 12,645. The blue-chip index is now up 4.81% so far in 2012, rising in two of the past three trading days.

The S&P 500 advanced 10 points, or 0.74%, to finish at 1364. The Nasdaq tacked on 13 points, or 0.45%, to settle at 2910.

"It seemed like some of the big companies did pretty well," said Joe Bell, senior equity analyst at Schaeffer's Investment Research. "Expectations are relatively low. They have come in quite a bit from beginning of the year. That kind of lowers the bar."

Within the Dow, 26 of the index's 30 components gained ground, led by Walt Disney ( DIS), Pfizer ( PFE) , Merck ( MRK) and Coca-Cola ( KO).

Shares of Coca-Cola rose 1.6% after the beverage giant posted second-quarter earnings of $1.22 a share on revenue of $13.09 billion, topping the average analysts' forecast for a profit of $1.19 a share on revenue of $12.98 billion.

Disney's stock jumped 3.1% after the company was upgraded to buy from neutral at Bank of America Merrill Lynch. The firm, which bumped its 12-month price target up to $58 from $45 as well, cited a favorable risk/reward profile for the upgrade.

The blue-chip losers were Alcoa ( AA), Home Depot ( HD), IBM ( IBM) and JPMorgan Chase ( JPM).

Health care, energy and conglomerates -- all defensive sectors -- saw the strongest buying action in the broad market.

Tuesday was the first big earnings day of second-quarter reporting season and most reports came in better than expected. Goldman Sachs ( GS), for example, reported second-quarter earnings of $1.78 a share on revenue of $6.63 billion, easily surpassing Wall Street's view for a profit of $1.16 a share on revenue of $6.28 billion. Shares finished up 0.32%.

After the closing bell, the earnings news was mixed. Intel ( INTC) delivered an above-consensus quarter but lowered its top-line growth forecast for fiscal 2012. The stock was marginally lower in after-hours action.

Shares of Yahoo! ( YHOO) were moving higher in extended trading after the Internet giant handily beat earnings expectations despite a slight revenue miss.

The market's early weakness on Tuesday came after Fed Chairman Bernanke stayed mum on the possibility of QE3 and offered a downbeat assessment of the economy.

Some of the impact of Bernanke's comments, which were part of his semi-annual testimony to Congress on monetary policy, was mitigated by an earlier report indicating inflation remains subdued in the United States, a trend that economists said could perhaps provide a bit of a cushion for further Fed easing.

The Labor Department reported before the markets open that the consumer price index was flat in June, as expected by economists polled by Thomson Reuters, after falling 0.3% in May. The core figure, excluding volatile food and energy prices, rose 0.2% in June, also as expected, and matched the prior month's rise.

"Overall, the report confirmed the very favorable inflationary backdrop for monetary policy, providing some cover for the Fed if they decide to pursue further monetary easing," said Millan Mulraine, senior U.S. strategist, TD Securities. "However, with the prolonged U.S. drought likely to push food prices higher in the coming months, the inflation outlook (in isolation) is unlikely to be sufficient to justify Fed action."

The FTSE in London settled down 0.59% and the DAX in Germany finished up a mere 0.18% after Bernanke's Congressional testimony. Earlier in Europe, the ZEW index of German investor expectations showed a decline to minus 19.6 in July from minus 16.9 in June.

Bernanke, who will appear in the House of Representatives on Wednesday, began his prepared remarks before the Senate Banking Committee on Tuesday by acknowledging the soft patch that's cropped up in the data over the past few months.

"The U.S. economy has continued to recover, but economic activity appears to have decelerated somewhat during the first half of this year," Bernanke said. "After rising at an annual rate of 2-1/2 percent in the second half of 2011, real gross domestic product (GDP) increased at a 2 percent pace in the first quarter of 2012, and available indicators point to a still-smaller gain in the second quarter."

One bright spot for the economy, Bernanke maintained, was the U.S. housing market recovery, a view that was backed up earlier when a gauge of builder confidence in the market for newly built, single-family homes jumped six points to 35 for July. It was the largest one-month gain recorded in nearly a decade, bringing the National Association of Home Builders index to its highest point since March of 2007.

The consensus was for an increase to 30. A level above 50 indicates that more builders view conditions as good than poor.

In other economic data, the Fed said early Tuesday morning that industrial production increased by a modest 0.4% in June, better than the 0.3% rise expected by economists, after falling by a downwardly revised 0.2% in May. Capacity utilization moved up in June to 78.9%, below the expected 79.2%, from a downwardly revised 78.7% in May.

August crude oil futures settled up 79 cents to $89.22 a barrel. August gold futures settled down $2.10 to $1,589.50 an ounce.

The benchmark 10-year Treasury slipped 10/32, raising the yield to 1.508%, while the greenback was down 0.16%, according to the dollar index.

-- Written by Andrea Tse and Joe Deaux in New York.

>To contact the writer of this article, click here: Andrea Tse.

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