* Banks rally after earnings
* China growth slows more than expected
* IBM falls after earnings fail to impress
* Indexes up: Dow 0.8 pct, S&P 1.1 pct, Nasdaq 0.7 pct
By Chuck Mikolajczak
NEW YORK, Oct 18 (Reuters) - U.S. stocks rose on Tuesday as bank earnings, though unspectacular, were strong enough to reassure investors about the sector and overshadow debt worries and signs of slowing growth elsewhere in the globe.
The three major indexes spent the early part of the session in negative territory before banks led the way higher. The KBW bank index advanced nearly 3.7 percent.
Volatility remained prominent as U.S. stocks suffered their worst loss in two weeks on Monday on the heels of its first two-week rally since July.
Bank of America Corp jumped 6.3 percent to $6.41 after it reported a third-quarter profit boosted by accounting gains and asset sales.
Goldman Sachs Group Inc added 2.4 percent to $99.22 after reporting a rare loss but said it was moving to cut costs, including employee pay. and
State Street Corp climbed 6.5 percent to $36.06 after its net income rose, lifted by tax benefits and double-digit gains from servicing and investment management fees.
“Part of the reason financials are acting better than people were largely expecting ... is because though earnings are by historic standards very, very disappointing, they are not as bad as a lot of the naysayers were expecting them to be,” said Peter Kenny, managing director at Knight Capital in Jersey City, New Jersey.
“There was some genuine panic the banks, the financials were going to start reporting earnings that were going to just undermine any shred of confidence and any kind of sustainable rebound. Really the earnings haven’t done that.”
The Dow Jones industrial average gained 88.29 points, or 0.77 percent, to 11,485.29. The Standard & Poor’s 500 Index gained 12.92 points, or 1.08 percent, to 1,213.78. The Nasdaq Composite Index gained 18.26 points, or 0.70 percent, to 2,633.18.
But International Business Machines Corp fell 5.3 percent to $177.77 after Big Blue’s earnings beat failed to stem worries about a slowdown in technology spending.
Gains were kept in check in early trade after Moody’s cautioned it may slap a negative outlook on France’s Aaa credit rating in the next three months if costs from helping to bail out banks and other euro zone members stretch its budget too thin.
Another negative was data showing China’s growth slowed in the third quarter to its weakest pace since early 2009. Gross domestic product rose 9.1 percent in the quarter from a year earlier, but was down from 9.5 percent in the previous period.
“What tends to happen simplistically is in earnings season people focus a little more on micro and less on macro. Then as earnings season finishes, they tend to go back and focus on the big picture issues again,” said Karl Mills, president of Jurika, Mills & Keifer Investment Partners in Oakland, California.
“The bigger issue really hasn’t changed much from one day to the next.”