Sky Not Falling: Dow Surges 276 Points

Just a day after the Dow sank below 11,000 for the first time in two years, the blue chips soared 276 points on a big day for banks while celebrating another tumble in crude oil. 

The gloomy mood on Wall Street appeared to vanish after Wells Fargo beat the Street and surprisingly boosted its dividend, helping to lift even Fannie Mae and Freddie Mac. 

Today’s Market

The Dow Jones Industrial Average jumped 276.74 points, or 2.52% to 11239.28, the Standard & Poor’s 500 index gained 30.45 points, or 2.51%, to 1245.36 and the Nasdaq Composite Index picked up 69.14 points, or 3.12%, to 2284.85. The consumer-friendly FOX 50 rose 19.36 points, or 2.23%, to 887.12.

The stock market enjoyed a rare rally on Wednesday despite a new report that showed consumer prices rose by the fastest amount in nearly three years. The rally grew as the day went on and stocks closed at the highest levels of the session. 

The broad rally was most obvious among financial stocks and the airline sector, each of which surged by more than 12%. 

While the bulls cheered the day's rally, traders and market observed remained cautious considering the onslaught of bad news Wall Street has dealt with over the past few weeks.

“I don’t think we are completely out of the woods yet," said Paul Nolte, director of investments at Hinsdale Associates. 

Bank of America (BAC) rocketed by more than 20% to lead the blue chips on Wednesday. Not far behind were financial giants JPMorgan Chase (JPM) and Citigroup (C), rising by more than 12% a piece. Also, General Motors (GM) soared 15% a day after announcing a major restructuring plan. Energy giants ExxonMobil (XOM) and Chevron (CVX) were among the only decliners on the Dow, falling on the oil price decline. 

“It was a bright spot in a really dark sea," Jason Weisberg of Seaport Securities told FOX Business. "In the financial sector I think we are seeing more short-covering than value buying."

The Nasdaq Composite posted huge gains, rising more than 3% on the day. United Airlines (UAUA) led the Nasdaq 100, jumping more than 40% on the lower oil prices and earnings beats from rival airlines. Also, chip maker Altera (ALTR) rising more than 14% on its second-quarter earnings beat

Financial stocks soared by 13%, benefiting from Wells Fargo's (WFC) results and dividend boost as well as solid gains for mortgage giants Freddie Mac (FRE) and Fannie Mae (FNM). Freddie announced plans to sell $3 billion of new two-year reference notes and $1 billion in a 10-year note on Thursday.

Wells Fargo kicked off the day's string of earnings beats when it announced second-quarter earnings of 53 cents a share, topping estimates by 3 cents. The financial company, which is the fifth-largest U.S. bank, also boosted its dividend by 10%. Wells Fargo’s stock surged by 30%.

The stock market welcomed another day of plunging oil prices, which fell as much as $7 to tumble below $132 a barrel before recovering. The selloff in oil prices was sparked by a new report that showed crude oil stockpiles rose by a larger-than-expected 3 million barrels last week. The Department of Energy also said gasoline stockpiles rose by 2.4 million barrels. 

Oil futures ended the day down $4.14 to $134.60 a barrel, bringing the two-day decline to nearly $11. Tuesday's $6 plunge was the largest one-day decline since the start of the first Gulf War in 1991.

The biggest beneficiaries of the oil decline was the airline sector, which jumped 18%. Names like JetBlue (JBLU), Continental (CAL) and Northwest (NWA) all had huge days. The sector was also helped by better-than-expected earnings reports. 

Wall Street also enjoyed earnings beats from a batch of other companies, including Gannett (GCI) and Abbott Labs (ABT) and tech bellwether Intel (INTC). 

The market was able to mostly shrug off the latest bearish economic report, which showed consumer prices jumped by 1.1% in June -- the largest one-month gain since September 2005. Excluding volatile food and energy prices, the core consumer price index rose by 0.3%. Consumer prices soared by 5% from a year ago -- the largest one-year gain since May 1991. 

Not surprisingly, consumer prices were pushed higher by the rising cost of energy, which increased by 6.6%. The commodities CPI rose by 1.9%, the largest monthly gain since records began in 1956. The latest inflation numbers may give credence to fears that the economy could face a period of both slow growth and troubling inflation. 

Also, the Federal Reserve's latest minutes show the members of the central bank's policy arm believe the next move in interest rates will likely be up. The minutes, which were from the June 24-25 meeting and were released on Wednesday, show that the Fed is more worried about inflation than the economy, which it acknowledges still faces challenges. 

Corporate Movers

Microsoft (MSFT) plans to meet with Time Warner (TWX) executives over a possible tie-up with the media giant's AOL unit, The Wall Street Journal reported on Wednesday. A deal with Time Warner for AOL would be an alternative to a larger one to takeover part or all of Yahoo! (YHOO). The discussions come ahead of Yahoo's Aug. 1 meeting when the company's shareholders will decide whether or not to oust the current board in favor of Carl Icahn's slate. The talks between Microsoft and Time Warner are preliminary in nature, the Journal reported. 

Merrill Lynch (MER) signed off on a $4.5 billion to $5 billion deal to sell its 20% stake in Bloomberg back to the company, The Wall Street Journal reported late Wednesday. The company has not reached a deal yet to sell its 49% stake in asset manager BlackRock (BLK), the newspaper reported. The Bloomberg deal would reportedly offset what is expected to be a fourth consecutive quarterly less for Merrill. 

Goldman Sachs (GS), Merrill Lynch (MER) and Deutsche Bank (DB) were all subpoenaed by the Securities and Exchange Commission for an investigation into suspected manipulation of the stocks of Lehman Brothers (LEH) and Bear Stearns, Bloomberg reported. The SEC reportedly sought trading records and e-mails from the major Wall Street banks. The news comes a day after the regulator issued new rules aimed at scaling back short selling financial stocks.

American Airlines (AMR) lost $1.13 per share on an adjusted basis, better than the $1.42 a a share analysts had expected. Including one-time items, American Airlines lost $5.77 per share, compared to a profit of $1.08. The airlines's revenue rose by 5.1% to $6.18 billion. The company also announced $500 million in additional financing to further bolster liquidity and plans to hold its planned divestiture of American Eagle. 

Delta Airlines (DAL) beat the Street with its second-quarter earnings. The airline, whose stock has plunged almost 70% in 2008 alone, posted adjusted-earnings of 35 cents per share, well above mean estimates for 10 cents.

Abbott Laboratories (ABT) beat the Street and boosted its earnings outlook. The healthcare products company’s adjusted-earnings of 84 cents per share topped estimates for 79 cents. The company’s second-quarter sales jumped 14.8% to $7.3 billion, compared to average estimates from Thomson Reuters of $7.2 billion. Looking ahead, Abbott sees third-quarter adjusted-earnings of 76 cents to 78 cents, compared to estimates for 79 cents.

Sprint (S) and South Korea’s SK Telecom are in preliminary talks to form a business alliance to develop new phones and services, The Wall Street Journal reported. The two telecoms are not in talks over an outright merger, the newspaper reported, contradicting a report on a friendly sale of Sprint a day ago.

Gannett (GCI) fell sharply after the newspaper chain posted second-quarter adjusted-earnings above expectations but also released plans for writedowns of $2.4 billion to $2.7 billion. Hurt by a 16.6% decline in advertising revenue at its flagship USA Today, Gannett's net income tumbled by 36%. The company's adjusted-earnings of $1.02 per share matched average estimates. 

Charles Schwab (SCHW) rose sharply after its second-quarter earnings of 27 cents topped estimates by a penny. The retail brokerage's revenue of $1.2 billion also beat estimates. 

eBay (EBAY) is expected to post a second-quarter profit of 41 cents per share on revenue of $2.17 billion after the closing bell on Wednesday. The online auction site was trading almost 4% higher ahead of its quarterly results. 

Data Dump

Industrial production rose by 0.5% last month, the largest one-month gain in 11 months. Economists surveyed by Dow Jones had only been expecting a 0.2% increase. Capacity utilization rose by a larger-than-expected 0.3%.

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, rose 32.03 points, or 1.02%, to 3174.76. The FTSE 100, London's benchmark index, lost 21.30 points, or 0.41%, to 5150.60.

On the continent, Paris's CAC 40 Index gained 51.30 points, or 1.26%, to 4112.45 while Germany's DAX picked up 73.67 points, or 1.21%, to 6155.37.

In Asia, Japan's benchmark Nikkei 225 Index added 6.24 points, or 0.05%, to 12760.80. Hong Kong's Hang Seng gained 48.73 points, or 0.23%, to 21223.50.