Wall Street closed with sharp gains on Tuesday as more companies joined big banks in reporting earnings ahead of expectations, offering some respite to investors worried about higher inflation denting the corporate bottomline.

Shares of Halliburton rose after the oilfield services provider posted a 41% increase in quarterly adjusted profit.[L4N2Z02BA] Toymaker Hasbro Inc reported quarterly profit ahead of expectations.

Truist Financial Corp also beat market estimates for quarterly profit, sending the bank's shares up.

"Earnings have come in better than lowered expectations," said Paul Kim, CEO of Simplify Asset Management in New York.

"So we're not seeing the bite of tighter monetary policy and inflation impacting revenue as much as feared."

Johnson & Johnson shares declined, reversing earlier gains. The healthcare giant reported profit and sales that exceeded expectations but cut its earnings outlook for the year due to a soaring U.S. currency.

A strong dollar also weighed on shares of IT hardware and services company IBM Corp, which beat quarterly revenue expectations on Monday but warned the hit from forex for the year could be about $3.5 billion.

The U.S. dollar marked its third straight day of declines as markets reduced the odds of a full percentage-point Federal Reserve rate hike this month. [USD/]

Spiraling inflation initially led markets to price in a 100-basis-point hike in interest rates at the upcoming Fed meeting later this month, until some policymakers signaled a 75-basis-point increase.

According to preliminary data, the S&P 500 gained 104.50 points, or 2.73%, to end at 3,935.35 points, while the Nasdaq Composite gained 348.86 points, or 3.09%, to 11,708.91. The Dow Jones Industrial Average rose 742.68 points, or 2.39%, to 31,815.29.

"The macro picture hasn't changed," said Kim. "We still have falling earnings, high inflation pressures and a tightening Fed. So longer term, I don't think this type of rally has staying power."

In this earnings season, analysts expect aggregate year-on-year S&P 500 profit to grow 5.8%, down from the 6.8% estimate at the start of the quarter, according to Refinitiv data.