Product announcements by Google and Microsoft helped lift tech shares Tuesday, while stocks finished a volatile session decisively higher after fresh Federal Reserve comments viewed as muted on inflation.

Traders work on the floor at the New York Stock Exchange in New York, Wednesday, Feb. 1, 2023. (Photo: AP)

Both Microsoft and Google parent Alphabet jumped more than four percent after announcing new artificial intelligence offerings, in what Microsoft CEO Satya Nadella called a technology "race."

Meanwhile, Fed Chair Jerome Powell acknowledged that there was still significant work to do to bring inflation under control, but did not shift significantly from his tone last week that markets had viewed as benign.

"Powell's tone was a bit friendlier and I think the market interpreted that as a dovish sign," said Steve Sosnick, chief strategist at Interactive Brokers.

The comments came after Friday's strong jobs report that sparked worries about prolonged Fed interest rate hikes.

The Dow Jones Industrial Average rose 0.8 percent to 34,156.69.

The broad-based S&P 500 climbed 1.3 percent to 4,164.00, while the tech-rich Nasdaq Composite Index gained 1.9 percent to 12,113.79.

The rally comes ahead of President Joe Biden's annual State of the Union address, at which he is expected to highlight the robust jobs market and progress in mitigating inflation.

Among economic indicators, data released Tuesday showed the US trade deficit grew $103.0 billion from 2021 to $948.1 billion last year, hitting a record.

Chemical giant DuPont jumped 7.5 percent as it reported better-than-expected profits and lifted its investor dividend by nine percent.