Not even news of a large earthquake in Southern California could shake this rally.

A day after the Dow plunged 240 points, the financials lifted the blue chips more than 260 points as crude oil prices closed at the lowest level in two months. 

Today's Market

The Dow Jones Industrial Average jumped 266.48 points, or 2.39% to 11397.56, the Standard & Poor’s 500 index gained 28.83 points, or 2.34%, to 1263.20 and the Nasdaq Composite Index picked up 55.40 points, or 2.45%, to 2319.62. The consumer-friendly FOX 50 rose 20.19 points, or 2.31% to 893.03.

In addition to the declining oil prices, Wall Street cheered a stabilization in consumer confidence and a big day for the greenback. The market mostly shrugged off Merrill Lynch's (MER) decision to dump assets at fire-sale prices as well as the largest decline in home prices on record. 

Stocks held strong even after news broke late in the day that California suffered an earthquake and Wall Street moved even higher as it became clear that the region escaped major damage. 

Bank of America (BAC) led the blue-chip advancers, surging 15% to outpace the gains among the banks. General Motors (GM) and JPMorgan Chase (JPM) also posted significant gains. Johnson & Johnson (JNJ) was the lone Dow stock failing to join in the rally. 

The Nasdaq Composite jumped almost 2.5% on Tuesday following its selloff from a day ago. Level 3 Communications (LVLT) helped lead the Nasdaq 100 with an 9% jump. On the downside, Sirius Satellite Radio (SIRI) fell by 16% after officially completing its buyout of XM Satellite Radio (XMSR). 

There were several corporate names that beat the Street on Tuesday with their earnings reports, including U.S. Steel (X), Colgate-Palmolive (CL) and McGraw-Hill (MHP). On the other hand, electronics giant Sony (SNE) saw its profit dive as it missed average analyst estimates.

Meanwhile, crude oil prices tumbled to their lowest level since May 6, helping to erase all of a modest rally from a day ago. Crude futures closed down $2.54 to $122.19 a barrel. 

Hit by the slowing economy and lower demand, oil prices have plunged more than $20 in recent weeks. Energy prices were also hurt on Tuesday by a stronger U.S. dollar, which soared 1% to three-week highs against the euro.

No sector enjoyed the oil plunge as much as airlines, with names like Continental (CAL) and American Airlines (AMR) posting double-digit percentage gains. As a group, the volatile airline stocks jumped more than 11%. 

On the economic front, the stock market responded positively after the Consumer Board released its consumer confidence index, which improved to 51.9 in July, up from 50.4 the month before. Economists had been expecting a more modest increase to a 51 reading. Consumer confidence appears to have stabilized in July in tandem with declining oil and gasoline prices

Wall Street mostly shrugged off the latest S&P/Case-Shiller 20-city home price index, which plunged by 15.8% in May from a year ago. It was the largest monthly decline since the index's inception in 2000. Average estimates called for a slightly larger 16% decline. The 20-city index, which measures the home prices from the 20 largest metropolitan areas, fell by 0.9% from the month before. 

Merrill Lynch unexpectedly became a rallying point on Tuesday even after the world's largest brokerage announced plans to unload $30 billion in mortgage-related assets at fire-sale prices. The moves will trigger writedowns of $5.7 billion on top of the more than $46 billion it has already taken. 

(Click here to read "Merrill's Latest Misfire")

As a result of those writedowns, Merrill Lynch said it will sell $8.5 billion in common stock, further diluting the value of current shareholders. The plan come less than two weeks after CEO John Thain assured analysts and shareholders that "we are in a very comfortable spot in terms of our capital." 

Shares of Merrill soared 8%, erasing earlier significant losses. Financial stocks as whole rallied back on Tuesday, jumping 7.6%. Banks like Lehman Brothers (LEH) and Wells Fargo (WFC) posted some of the largest gains. 

Corporate Movers

U.S. Steel (X) surged by double-digit percentages as it reported a surprisingly large profit of $5.65 a share on $6.74 billion in revenue. The results easily beat the $3.91 earnings per share estimate expected by analysts interviewed by Thomson Reuters. 

British Airways and Spanish airline Iberia acknowledged in a statement that they are in discussions over a possible merger. While no financial details were released, the airlines said both boards are unanimous in their support but that a deal will take “several months” to complete. British Airways already owns a 13.15% stake in Iberia. Shares of British Airways soared more than 8% on the London Stock Exchange.

Starbucks (SBUX) slashed 1,000 jobs, including that of chief operating officer, as the coffee chain continues to react to the slowing economy. The job cuts account for 15% of Starbucks’ workforce. COO Martin Coles will now take over as president of Starbucks Coffee International, replacing Jim Alling.

Ford (F) is expected to raise the prices on leases for several profitable trucks and SUVs due to "extreme losses" at its finance business, The Wall Street Journal reported. The changes, which are effective Aug 1., are expected to make several 2008 models too expensive to be leased, the newspaper reported. The Ford F-150, Super Duty pickups, Ford Explorer and Sport Trac SUVs will reportedly be affected by the new lending terms. 

Colgate-Palmolive (CL) saw its stock price jump after it posted a 19% jump in second-quarter profit and predicted double-digit earnings growth for 2009. The consumer products maker's adjusted-profit of 98 cents per share and revenue of $3.96 billion exceeded average estimates of 94 cents on $3.84 billion in sales. 

Alcatel-Lucent (ALU) rose almost 6% after the French telecom announced the departures of Chairman Serge Tchuruk and CEO Patricia Russo. No replacements have been named but the executives are expected to step down before the end of the year. The changes at the top were announced as the company released its sixth consecutive quarterly loss, results that missed analyst estimates.

Northrop Grumman (NOC), a defense contractor, reported a 7.6% decline in second-quarter profit. The company's adjusted-profit of $1.40 per share matched average estimates while its $8.63 billion in sales topped the Street's view.

McGraw-Hill (MHP), owner of the rating agency Standard & Poor's and magazine BusinessWeek, saw its second-quarter profit tumble 23% but still beat the Street. The company's adjusted-profit was 71 cents per share, compared with analyst-forecasted earnings of 65 cents. McGraw-Hill has seen profits decline since the subprime debacle took its toll on Standard & Poor's business. 

Waste Management's (WMI) adjusted-profit was 63 cents per share in the second quarter, topping average estimates from Thomson Reuters for 59 cents. The garbage disposal company's revenue increased by 3.9% to $3.49 billion, compared to estimates of $3.43 billion. Waste Management also reaffirmed its 2008 outlook, saying it sees hitting the high end of its previous range, a figure that would miss the Street's estimates. 

Sirius Satellite Radio (SIRI) officially completed its buyout of XM Satellite Radio (XMSR) after receiving government approval, combining the nation's only two satellite radio providers. XM shareholders will receive 4.6 shares of Sirius common stock for each share of XM. The buyout deal, first announced in February 2007, was approved in a 3-2 vote by the Federal Communications Commission. Shares of Sirius were recently down more than 15%. 

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, rose 11.45 points, or 0.35%, to 3324.86. The FTSE 100, London's benchmark index, gained 6.60 points, or 0.12%, to 5319.20.

On the continent, Paris' CAC 40 slid 3.96 points, or 0.09%, to 4320.49, while Germany's DAX picked up 47.65 points, or 0.75%, to 6398.80.

In Asia, Hong Kong's Hang Seng fell 429.21 points, or 1.89%, to 22258.00 while Japan's Nikkei 225 dropped 194.33 points to 13159.45.