The Nasdaq scored a record closing high on Tuesday and the S&P 500 and the Dow also advanced as Federal Reserve Chair Jerome Powell reassured investors while they digested Tuesday's data and waited for Wednesday's crucial consumer inflation report.

U.S. producer prices increased more than expected in April as the cost of services and goods rose sharply, leading traders to pare back bets of a first rate cut in September.

But Powell on Tuesday described the producer price index report as more mixed than hot given that prior-period data was revised lower.

Investors were also encouraged by Powell's comment that he did not expect the central bank's next interest rate move to be a hike, despite a recent run of higher-than-expected inflation.

"The market is getting more comfortable with higher-for-longer rates. The real question has been lately if a hike is a possibility and Powell's reiterating that it's not on the table right now," said Lindsey Bell, chief strategist, 248 ventures, Charlotte, North Carolina. She also noted that stocks appeared to gain ground during the session as Treasury yields declined.

"It seems that the bond market is digesting all this and the stock market is reacting to the bond market," Bell said.

Still, investors cautiously awaited Wednesday's Consumer Price Index figures to assess whether upside surprises in the first quarter extended into April.

Sticky inflation and persistent labor market strength have prompted financial markets and most economists to push bets for an initial Fed rate cut back to September from March previously.

Still, stocks have rallied so far this year, thanks to better-than-expected earnings for the first quarter and expectations that the Fed would cut rates.

While the tech-heavy Nasdaq composite easily cleared its April 11 record close, the S&P 500 ended the day around 0.1% below its March 28 record close. The Dow ended less than 1% below its record close, also reached on March 28.

The Dow Jones Industrial Average rose 126.60 points, or 0.32%, to 39,558.11. The S&P 500 gained 25.26 points, or 0.48%, at 5,246.68 and the Nasdaq Composite advanced 122.94 points, or 0.75%, to 16,511.18.

Among the S&P's 11 major industry sectors, consumer staples was the biggest decliner, down 0.2%, while technology was the biggest gainer, adding 0.9%.

Shares of Alphabet closed up 0.7% after the Google parent showed how it is using artificial intelligence across its businesses, including a beefed-up Gemini chatbot and improvements to its search engine.

Shares in Home Depot closed down 0.1% after falling more than 2% earlier in the day following the retailer's quarterly report, which showed that same-store sales fell more than expected as Americans focused on small-scale home projects, spending less on big-ticket items.

U.S.-listed shares of Alibaba ended down 6% after it reported an 86% drop in fourth-quarter profit.

On Holding rallied 18.3% as the footwear maker raised its annual sales forecast after beating quarterly sales expectations, citing strong demand for its running shoes.

U.S. President Joe Biden unveiled a bundle of steep tariff increases on an array of Chinese imports including electric vehicles, computer chips and medical products.

U.S.-listed shares of Chinese EV maker Li Auto fell more than 2% while Tesla gained more than 3%.

GameStop shares extended their recent rally to close up 60% at $48.75 after flag bearer Roaring Kitty posted on X.com for the first time in three years.

Other 2021 meme rally participants and highly shorted stocks also advanced with AMC Entertainment rising almost 32% to $6.85 and Koss Corp ending up 40.7% at $6.15.

The most heavily traded NYSE shares were AMC and GameStop. Advancing issues outnumbered decliners by a 2.43-to-1 ratio on the NYSE where there were 358 new highs and 31 new lows.

On the Nasdaq, advancing issues outnumbered decliners by a 1.87-to-1 ratio and it recorded 171 new highs and 74 new lows. The S&P 500 posted 31 new 52-week highs and no new lows.

On U.S. exchanges 13.66 billion shares changed hands compared with the 10.91 billion moving average for the last 20 sessions. (Reporting by Sinéad Carew in New York, Bansari Mayur Kamdar and Shristi Achar A in Bengaluru; Editing by Sriraj Kalluvila, Devika Syamnath and Richard Chang)