Soaring financial stocks and red hot airlines carried the blue chips to an unlikely triple-digit rally on Tuesday as crude oil prices sank below $128 a barrel. 

The late-day surge in stocks overshadowed several dismal earnings reports from financials like American Express and Wachovia. 

Today's Market

The Dow Jones Industrial Average jumped 135.16 points, or 1.18% to 11602.50, the Standard & Poor’s 500 index gained 17.00 points, or 1.35%, to 1277.00 and the Nasdaq Composite Index picked up 24.43 points, or 1.07%, to 2303.96. The consumer-friendly FOX 50 added 11.10 points, or 1.25% to 902.58.

Tuesday had the potential to be an ugly day on Wall Street as the Dow dropped nearly 100 points out of the gate on disappointing earnings from a batch of companies, including Merck (MRK), American Express (AXP) and Wachovia (WB). Instead, late-day buying in the financials and the drop in oil prices allowed the market to reverse course and close with some serious gains. 

“We were seeing some real money coming into [financials]. Money managers and fund managers are afraid of missing the move," said Steve Sachs, director of trading at Rydex Investments. "That’s obviously a bullish sign for the sector.”

Bank of America (BAC) posted huge gains, rallying further than the rest of the financials to lead the blue chips. Also, General Motors (GM) jumped almost 10% on the lower oil prices. Not surprisingly, AmEx and Merck had the worst performances among the Dow stocks. 

The Nasdaq Composite had been in the red for nearly the whole day but closed higher, led by United Airlines' (UAUA) enormous 65% gains. On the downside, SanDisk (SNDK) plunged 25% to lead the way down on the Nasdaq 100 after the memory card maker slashed its outlook and posted a quarterly loss. 

The buying on Wall Street was initially fueled by tumbling oil prices, which closed below $128 a barrel. Oil futures were hurt by the stronger U.S. dollar, which jumped almost 1% against the Euro. The greenback was helped by hawkish comments made by Charles Plosser, Philadelphia Fed President, who said he sees interest rates rising "sooner rather than later." 

Also, the energy market appeared to be less worried by Tropical Storm Dolly, which could avoid causing production disruptions in the Gulf of Mexico. After falling as much as $5, oil closed down $3.09 at $127.95 a barrel. The declines erased oil's rally on Monday. It also comes after crude oil prices plunged last week, suffering their worst percentage losses since late 2003. 

No sector enjoyed the tumbling oil prices as much as the airlines, which soared 22% as a group on the day. Leading the way was United Airlines (UAUA), which surged by 65% as it announced plans to boost its liquidity by about $1.2 billion. Like JetBlue (JBLU) and U.S. Airways (LCC), United posted quarterly losses on Tuesday that were more modest than analysts had been looking for. 

There was no shortage of earnings reports for Wall Street to talk about on Tuesday. While the results were mixed to negative, the stock market rallied anyway. In particular, traders saw bleak results from AmEx, Wachovia and Ohio-based KeyCorp (KEY).

Despite the negative financial headlines, the sector soared almost 6% on Tuesday, led by Wachovia's 26% jump. The Charlotte-based bank posted an $8.86 billion loss, slashed its dividend and announced it would lay off more than 6,300 people. Wachovia lost $1.27 per share, compared to expectations for a more modest 78 cent loss. 

Banking giant Washington Mutual (WM) is expected to post a loss of $1.02 a share after the market closes Tuesday.

 AmEx wasn't even close to meeting analyst estimates with a 38% decline in second-quarter profit to 56 cents a share. Average estimates from Thomson Reuters called for 83 cents. The company also signaled trouble ahead, saying it no longer backs its previous earnings growth forecast as conditions worsened, especially last month. 

The tech sector didn't enjoy a rally on Tuesday as Apple's (AAPL) cautious outlook for the current quarter caused concern. The iPod maker's profit and revenue jumped last quarter, easily topping estimates. However, Apple, which has a reputation for giving conservative outlooks only to beat them later, said it sees fiscal fourth-quarter earnings of $1 per share, well below the $1.25 analysts were looking for. 

Corporate Movers

Ford (F) plans to convert three of its North American truck plants so they can now build small cars that were originally developed for Europe, The Wall Street Journal reported. The move reflects the auto makers' attempts to react to soaring oil prices and customers' lack of appetite for gas guzzlers. Ford is expected to announce the plan when it posts its second-quarter earnings on Thursday, the Journal reported. 

UPS (UPS), the world's largest package-delivery company, reported an in-line profit of 85 cents per share, down from $1.04 a year ago. The company's revenue rose 6.7% to $13 billion. UPS's profits have declined this year as the company deals with record-high gas and jet fuel costs. 

General Electric (GE) inked a global partnership with Mubadala Development, an Abu Dhabi-based sovereign fund, that will likely make the state-owned company a top 10 institution investor of GE. The major investment, which will be made over time, will include a joint venture in commercial finance that is valued at $8 billion. The two companies' broad partnership also covers clean energy research and development and aviation in the Middle East.

XM Satellite Radio (XMSR) and Sirius Satellite Radio (SIRI) were dealt a setback when The Wall Street Journal reported an FCC commissioner voted against the companies' merger. While the vote was expected and was just the first cast against the deal, it also doesn't bring the long process any closer to ending, the newspaper reported. So far two have voted in favor of the deal and two more commissioners have yet to vote. 

KeyCorp (KEY), a regional bank based in Ohio, posted a loss from continuing operations of $2.70 a share, compared with a profit of 85 cents from a year ago. The company said it would also cut its dividend. 

SunTrust Banks (STI) posted a 21% decline in adjusted second-quarter profit to 78 cents a share, topping forecasts for 64 cents. The Atlanta-based bank said it loan losses increased in the quarter to $1.8 billion. 

Caterpillar's (CAT) second-quarter profit rose 34% to $1.74 per share, easily topping estimates of $1.54. The company's revenue increased by 20% to $13.62 billion.  

UnitedHealth (UNH) jumped after it posted a second-quarter profit of 67 cents a share on $20.3 billion in revenue, topping estimates of 64 cents on $20.03 billion in revenue. 

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, fell 7.68 points, or 0.23%, to 3326.24. The FTSE 100, London's benchmark index, slumped 40.20 points, or 0.74%, to 5364.10.

On the continent, Paris' CAC 40 rose 0.12 points, or less than 0.01%, to 4327.26, while Germany's DAX gained 17.95 points, or 0.28%, to 6442.79.

In Asia, Hong Kong's Hang Seng fell 5.42 points, or 0.02%, to 22537.48. The Nikkei 225 gained 381.26 points to 13184.96.