NEW YORK (Reuters) - Stocks rallied on Wednesday, with Apple's surge giving the Nasdaq its biggest gain of the year, while the Fed chairman reassured markets that the central bank would do more if necessary to lift the economy.
Apple Inc (AAPL.O) fueled optimism that the current earnings season would be much stronger than expected, generating gains across all market sectors. The iPad and iPhone maker's results, released after Tuesday's closing bell, showed that its quarterly profits nearly doubled, while its revenue easily topped expectations. The rally in Apple's stock especially benefited the S&P 500 tech sector index .GSPT, which jumped 3.2 percent.
Federal Reserve Chairman Ben Bernanke spurred further gains when he said the U.S. central bank "would not hesitate" to launch another round of bond purchases to drive borrowing costs lower if it looked like the economy needed it.
Shares of Apple, which has the world's biggest market capitalization, jumped 8.9 percent to end at $610. The stock scored its best daily gain in a little more than three years and Wednesday's rally added $46.3 billion to Apple's market cap. Earlier, Apple surged 10.3 percent to a session high at $618.
At Wednesday's close, Apple accounted for 5.05 points -or 27 percent - of the S&P 500's gain for the day of 18.72 points, said Howard Silverblatt, senior analyst at Standard & Poor's.
Apple's results boosted S&P 500 companies' earnings growth to an estimated 6.9 percent for the first quarter, up from an estimate of 4.6 percent before Apple, according to Thomson Reuters data.
Apple's stock had sold off recently, partly on fears that its earnings could disappoint.
"It was a big relief" to many investors, said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois, referring to Apple's results. "There were a lot of worries going into that earnings report. I think people were worried iPhone growth was going to slow, and it was the same thing with iPad growth.
"What they didn't take into account was iPhone growth throughout the world. That's what the market didn't see properly."
The Dow Jones industrial average .DJI shot up 89.16 points, or 0.69 percent, to 13,090.72 at the close. The Standard & Poor's 500 Index .SPX rose 18.72 points, or 1.36 percent, to 1,390.69. The Nasdaq Composite Index .IXIC jumped 68.03 points, or 2.30 percent, to 3,029.63, and scored its best daily percentage gain since December 20.
The earnings season so far has been stronger than expected. With 200 of the S&P 500 companies reporting, three-fourths have topped estimates, according to Thomson Reuters data.
Giving the Dow its biggest lift was Boeing Co (BA.N). It posted higher quarterly profit, helped by increased commercial aircraft sales, and raised its earnings forecast for the year. The stock shot up 5.3 percent to $77.08.
On the down side, Caterpillar Inc (CAT.N) shares dropped 4.6 percent to $103.44 after it said profit rose 29 percent. But the heavy equipment maker stoked Wall Street's fears about emerging markets by repeatedly citing slowdowns in economic growth in China and Brazil.
After the closing bell, shares of Akamai Technologies (AKAM.O) fell 7.1 percent to $36 following the release of its results.
During the regular session, Bernanke's comments came as a welcome surprise to some stock investors.
"People looked at the FOMC statement and saw no mention of QE3, but in his press conference, Bernanke made it quite clear that additional asset purchases remain completely on the table. That may have been a revelation to some of the earlier sellers," said William O'Donnell, managing director and head of U.S. Treasury strategy at RBS Securities in Stamford, Connecticut.
The Dow Jones Transportation Average .DJT ended up 0.9 percent, despite the day's downbeat economic data. Investors often watch the transportation average as an indicator of the stock market's future direction.
March durable goods orders fell 4.2 percent in the biggest drop in three years. The report was the latest to show softness in U.S. economic data.
Volume was 6.8 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE Amex, compared with the daily average this year of 6.77 billion.
Advancers outpaced decliners by a ratio of more than 3 to 1 on the NYSE and on the Nasdaq, nearly three stocks rose for every one that fell.