Stocks closed higher in choppy trading Tuesday, wiping out the previous session's declines, thanks to better-than-expected earnings reports and as investors remained hopeful that the central bank may still be open to further easing.

The Dow Jones Industrial Average rallied 78.33 points, or 0.62 percent, to finish at 12,805.54, led by Disney and Merck.

The S&P 500 jumped 10.03 points, or 0.74 percent, to end at 1,363.67. The Nasdaq added 13.10 points, or 0.45 percent, to close at 2,910.04.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, slipped back below 17. (Read More: S&P 500 Nears ‘Ultimate’ Death Cross )

All 10 S&P sectors finished in positive territory, led by materials and health care.

Stocks initially tumbled after Bernanke's testimony at first blush gave no clear indication that the Fed was planning to provide further easing. Bernanke also told the Senate Banking Committee in his semiannual report that economic uncertainty is increasing , mainly due to the European debt crisis and the looming “Fiscal Cliff” in the U.S. (Read More: After ‘The Bernank,’ Stocks a Buy—Pros )