Stocks rallied Wednesday after better-than-expected quarterly results from JPMorgan Chase jpm and two other Dow components raised investors' hopes that companies and the economy are indeed recovering from the protracted global credit crisis. The Dow Jones industrials rose more than 250 points.
Investors anxious about corporate earnings and their impact on the economy were relieved after JPMorgan, Coca-Cola ko, and Intel intc all topped projections.
The news sent the Dow up 256.80 points, or 2.08%, to 12,619.27. In the broader market, the Standard & Poor's 500 index rose 30.28, or 2.27%, to 1,364.71, and the Nasdaq composite index rose 64.07, or 2.80%, to 2,350.11.
The battered financial sector advanced after JPMorgan reported profit fell 50% because of tight credit markets, but still beat analysts' expectations. The nation's third-biggest bank, which is in the process of acquiring ailing Bear Stearns Cos., reported $2.6 billion of write-downs tied to its loan portfolio.
"You have a combination of JPMorgan and all these other strong earnings out there from a broad range sectors, and that's helping the buying we're seeing," said Todd Salamone, director of trading and vice president of research at Schaeffer's Investment Research. "There's an unwinding of all the negativity that we saw ahead of the earnings season."
Salamone and other analysts have been hoping that strength in corporate earnings would act as a catalyst for a significant rally; the market has managed a choppy ascent since hitting lows in early March. Investors have been growing more confident in recent weeks that the Federal Reserve's efforts to boost the economy and the troubled credit markets are working. Wednesday's earnings reports bolstered that sentiment.
The Dow is up more than 800 points from a low near 11,740, reached March 10.
In addition to earnings reports, Wall Street weighed sluggish economic reports on inflation and housing that were mostly within expectations. The Federal Reserve also released its beige book report, which said the economy is weakening amid a softening labor market.
Bond prices fell as stocks looked more attractive.
Oil prices crossed $115 for the first time Wednesday, rising after a government report showed crude-oil inventories fell unexpectedly last week for the second straight period.
Gold prices rose, and the dollar was mostly lower against other major currencies.
JPMorgan Chief Executive Jamie Dimon said the bank is well capitalized and has enough liquidity to handle difficult market conditions, but did not call an end to the credit crisis like other bank CEOs have in recent weeks.
"We got a nice rally here and that's because of the financials, they are holding their gains," said Todd Leone, managing director of equity trading at Cowen & Co. "They have helped out the market and are a real driver."
Dow component Intel reported late Tuesday that quarterly profit matched analysts' expectations and sales topped projections. Intel also issued a forecast that kept profit-margin predictions for 2008 intact.
Meanwhile, Coca-Cola reported first-quarter profit rose 19% on a 21% increase in sales. Results from the Dow component easily surpassed Wall Street expectations.