Wall St gains as banks lifted by Geithner remarks
NEW YORK (Reuters) - Stocks rose on Tuesday after Treasury Secretary Timothy Geithner indicated most banks have sufficient reserves to protect against possible losses, sparking a rebound in bank shares.
Earnings from a handful of blue-chip companies also boosted sentiment, led by United Technologies Corp (UTX.N) as the industrial bellwether forecast a return to growth next year.
JPMorgan Chase & Co (JPM.N) shares charged more than 9 percent higher and were the leader on the Dow, a day after worries that government stress tests would reveal deep flaws in bank balance sheets dragged stocks to their biggest loss since March 5.
"There was concern that the stress tests might indicate that a lot of the banks needed additional capital but his comment was that the majority of banks are adequately capitalized," said Bucky Hellwig, senior vice president at Morgan Asset Management, in Birmingham, Alabama.
The Dow Jones industrial average .DJI rose 127.83 points, or 1.63 percent, to 7,969.56. The Standard & Poor's 500 Index .SPX gained 17.69 points, or 2.13 percent, to 850.08. The Nasdaq Composite Index .IXIC was up 35.64 points, or 2.22 percent, at 1,643.85.
Financials were the best-performing sector in the broad S&P 500 index .SPX after Geithner said most U.S. banks have enough capital to keep lending, but bad debts are slowing a recovery.
The earnings season saw one of its biggest days yet with five blue-chips reporting. On the downside, Merck & Co Inc (MRK.N) and Coca-Cola Co (KO.N) were the Dow's biggest drags after both companies said sales were feeling the effects of the global slowdown.
Merck was down 6.7 percent at $23.54, while Coke fell 2.8 percent to $43.09.
Technology shares could see a boost on Wednesday after Yahoo Inc (YHOO.O) reported profit after the bell that met expectations and said it would cut 5 percent of its worldwide work force.
Yahoo also forecast second-quarter sales in a range between $1.425 billion and $1.625 billion, compared to a Reuters Estimates forecast of $1.227 billion. Shares of the Internet company rose 1.6 percent to $14.61 in extended trade.
The technology sector saw another day of merger activity after chipmaker Broadcom Corp (BRCM.O) made an unsolicited bid to buy Emulex Corp (ELX.N), a maker of storage equipment. On Monday, Oracle Corp ORCL.O said it would buy Sun Microsystems Inc JAVA.O.
"A lot of the technology companies have pristine balance sheets and lots of cash, so it makes sense to make strategic acquisitions at this point in time, so when the cycle does turn they'll have a competitive advantage that has been enhanced," said Hellwig.
Emulex surged 46.8 percent to $9.70, while Broadcom fell 5.8 percent at $20.52.
Shares of United Tech, the world's largest maker of elevators and air conditioners, rose 4.8 percent to $47.99 after the company beat profit expectations and said that although order rates remained down, there were signs of stabilization, especially in China.
The KBW bank index .BKX climbed 8.1 percent, reversing earlier declines after Geithner's testimony. JPMorgan jumped 9.6 percent to $32.53 and Wells Fargo & Co (WFC.N) gained 10.7 percent to $18.81. The Obama administration has said results of the stress tests on banks' capital levels will be released on May 4.
Citigroup Inc (C.N) jumped 10.2 percent to $3.24 after Chief Executive Vikram Pandit said he expects the bank to rebound from its current woes and repay "every dollar" it owes the U.S. government.
The S&P reclaimed about half of Monday's loss, which had thrown a speedbump into the market's impressive six-week rally. The broad index is up more than 25 percent from the early March bear market low.
Trading was active on the New York Stock Exchange, with about 1.67 billion shares changing hands, above last year's estimated daily average of 1.49 billion, while on Nasdaq, about 2.45 billion shares traded, above last year's daily average of 2.28 billion.
Advancing stocks outnumbered declining ones on the NYSE by 2,409 to 634 while advancers beat decliners on the Nasdaq by about 2,021 to 671.
(Editing by Leslie Adler)