US stocks rallied for a second session on Wednesday after JPMorgan Chase, Coca-Cola (NYSE:KO) and other leading companies reported robust results, cheering investors after a lacklustre opening to the 2008 first-quarter earnings season.
JPMorgan said profit halved and it took substantial writedowns but the results were roughly in line with expectations and the shares climbed after Jamie Dimon, chief executive, said the credit crisis may be nearing an end.
The third-biggest US bank has proven to be one of the more resilient institutions amid recent financial markets turmoil, allowing it to profit from the distress of competitors. Over the past year, its share price has fallen by 11 per cent compared with a 30 per cent fall for the S&P 500 financials index. JPMorgan rose 6.7 per cent to $44.96.
Wednesday's results should go some way towards reassuring investors that other banks about to release their earnings could at least hit reduced analyst targets.
Merrill Lynch, which reports on Thursday, rose 3.6 per cent to $44.89 and Citigroup (NYSE:C) , which reports on Friday, climbed 2.8 per cent to $23.44. The S&P 500 index of financial stocks added 2.3 per cent.
Meanwhile, Coca-Cola said first-quarter profit and revenues jumped, thanks to strong trading in Latin America and Russia. It also benefited from the earnings-enhancing effect of a weaker dollar. Shares in Coca-Cola, which have gained about 18 per cent in the last year as investors have looked to consumer staples for a safe haven, added 0.1 per cent to $60.99.
The positive results sparked a wider market rally that gained momentum during the day. By the close the benchmark S&P 500 index was 2.3 per cent higher at 1,364.66, its biggest gain since the start of the month. The Nasdaq Composite rose 2.8 per cent to 2,350.11 and the Dow Jones Industrial Average rose 2.1 per cent to 12,619.27.
"There is a lot of cash on the sidelines [with investors] desperate for good news so they can get to work and start making some real returns," said Joe Kinahan, chief derivatives strategist at Thinkorswim.com, an online brokerage.
"Fund managers cannot continue to have 2 per cent 10-year rates, so what we are seeing today is that at any hint of good news, money comes pouring into the market."
That enthusiasm was barely dented by new data showing that inflation rose in March, potentially limiting consumer spending, while housing starts and permits fell to their lowest levels since 1991.
In fact, homebuilders rose on the hope that reduced supply might begin to dent the glut of housing stock depressing prices. KB Homes added 6.6 per cent to $24.41 while Lennar (NYSE:LEN) climbed 6.3 per cent to $18.50.
A vigorous forecast from Intel (NASDAQ:INTC) , the technology sector bellwether that reported after the close on Tuesday, helped maintain positive momentum overnight.
Intel shares climbed 6.1 per cent to $22.18 while an index of technology stocks, battered in recent weeks by a series of warnings from major manufacturers, recovered 3.1 per cent.
IBM rose 2.8 per cent to $120.47 in after hours trade after it posted big increases in first-quarter profits.
Wednesday's results may go some way to combat the market's disappointment at earnings misses and reduced forecasts from blue chips Alcoa, UPS and GE last week. The picture now is a mixed one, with pockets of resilience set against a bleak backdrop of a faltering US economy.
Amid the broader market rally, the industrials sector was particularly strong, buoyed by sturdy results from CSX (NYSE:CSX) , the railroad company. CSX climbed 3.7 per cent to $59.89 while fellow railway company Burlington Northern Santa Fe (NYSE:BNI) rose 4.9 per cent to $99.30.
The leading sector on the S&P 500, however, was materials.
US Steel rose 6 per cent to $155.37 while Freeport-McMoRan Copper & Gold gained 7.3 per cent to $113.22. Monsanto (NYSE:MON) hit a record high, gaining 7.2 per cent to $131.54.
Oil prices, which touched record highs, and lower-than-expected inventories of petroleum products also lifted related stocks.
Tesoro jumped 7.7 per cent to $27.99 while Exxon Mobil (NYSE:XOM) advanced 2.3 per cent to $92.89.
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