Contradicting conventional wisdom, the blue chips enjoyed a second consecutive triple-digit rally on Wednesday despite a $4.50 surge in the price of crude oil. 

Today's Market

The Dow Jones Industrial Average rose 186.13 points, or 1.63% to 11583.69, the Standard & Poor’s 500 index gained 21.06 points, or 1.67%, to 1284.26 and the Nasdaq Composite Index picked up 10.10 points, or 0.44%, to 2329.72. The consumer-friendly FOX 50 rose 13.18 points, or 1.48% to 906.21.

Even though it initially cooled off the hot stock market, the rebound in oil prices couldn't keep Wall Street down for long. Stocks closed at or near the highest level of the day as traders cheered a solid rally for financial stocks, a better-than-expected private sector employment report and the Federal Reserve's decision to extend and enhance its emergency funding programs. 

On another day the stock market would have likely sold off on a $4.50 jump in crude oil prices, which have slumped over the past few weeks but remain a potential trouble area. Instead, the market focused on a financial sector that has reacted well to recent news, especially Merrill Lynch's (MER) fire sale of $30 billion in assets earlier this week. 

“We’re certainly not overlooking oil …But it’s taking a little bit of a back seat to what we’re seeing in the financials," said Michael James, senior equity trader at Wedbush Morgan Securities in Los Angeles. 

It's been a real tug of war between the bulls and bears lately on Wall Street. After the blue chips plunged 522 points during two recent ugly days, the Dow has rebounded strongly by picking up more than 450 points from just the past two trading sessions alone. 

Energy titans Chevron (CVX) and ExxonMobil (XOM) were the two largest percentage gainers on the Dow, rising more than 5% and 4% respectively thanks to the oil prices. On the downside, General Motors (GM) slid 4%, erasing earlier gains of as much as 7%. 

The stock market threatened to close in the red after the latest inventory data from the Department of Energy, which showed a larger-than-expected 3.5 million barrel decline in gasoline stockpiles. The report also showed crude stockpiles declined by just 100,000 barrels last week, compared to the 1.1 million-barrel decline that analysts had expected. 

Crude closed up $4.58 on the day at $126.77 a barrel. Even with the energy rally, oil prices have plunged $20 since closing at an all-time high of $145 a barrel on July 3. Oil prices were also boosted on Wednesday by the dollar, which pared earlier gains against rivals. Energy stocks soared on the higher oil prices, jumping 5.5% as a group. Names like Hess (HESS) and Schlumberger (SLB) posted significant percentage gains. 

Wall Street reacted very positively to the monthly ADP Employment Report, which surprised Wall Street by estimating that the private sector created 7,000 jobs in July. Economists had been looking for a decline of 65,000 jobs. 

However, Wall Street will likely take the good news with a grain of sale as the ADP report is not considered as important or as accurate as Friday’s government report, which gauges private sector jobs along with government, health care and education jobs. 

"The survey is closely watched by markets and causes a quick reaction even though it has generally been wrong either in direction or magnitude," said Mark Lieberman, senior economist at FOX Business. "The track record suggests the ADP survey is hype."

“Whether you believe it or not… it’s a very pleasant surprise," NYSE trader Alan Valdes of Hilliard Valdes told FOX Business. “You might have a nice, little rally here for the rest of the summer.” 

Meanwhile, the Federal Reserve said before the opening bell that it will extend a key emergency loan program for investment banks, citing "continued fragile circumstances in financial markets." Started during the darkest days of the credit crisis, the Fed's program that allows banks to borrow cash directly from the central bank will be extended until Jan. 30. 

The central bank also extended another program, which allows investment banks to swap out risky securities for more safe Treasury ones, until Jan. 30. Additionally, the Fed announced a new program that will allow commercial banks to be able to bid on cash loans that last for 84 days, a way to complement ongoing measures to boost liquidity in the short-term cash market. 

"It’s another indication of how much the government agencies are really trying to demonstrate that every tool that can be helpful to the market is being implemented," said Peter Cardillo, chief market economist at Avalon Partners. 

In other regulatory news, the Securities and Exchange Commission extended its short-selling rules on a selection of financial names in an effort to bring more stability to the sector. The emergency measures, which took effect July 21, will now be extended through August 12. The SEC rules, which require investors to borrow a stock before selling it short, were aimed at making short-selling more restrictive. (Click here to read Elizabeth MacDonald's report called "Get Shorty") 

The morning's earnings schedule was relatively light, with companies like IAC/Interactive (IACI), Moody's (MCO) and Corning (GLW) reporting in-line or better-than-expected results. The real show will begin after the closing bell when big-name companies like Walt Disney (DIS), Starbucks (SBUX) and Visa (V) are all scheduled to report quarterly results. Those figures may very well set the stage for Thursday's action.

Corporate Movers

McGraw-Hill's (MHP) Standard & Poor's, Moody's (MCO) and Fitch Ratings were all sued on Wednesday by the Connecticut attorney general, who said the ratings agencies intentionally gave bonds from municipalities lower ratings at a cost of millions of dollars to taxpayers. Fitch and Moody's said the suit was without merit. 

General Motors (GM) was the worst performing stock on the Dow as the automaker released new details of its previously announced plan to cut $10 billion in costs. GM will reduce its U.S. salaried worker headcount by 15% by Nov. 1, according to Dow Jones Newswires. Earlier in the month the automaker said it expected to cut 20% of its salaried workers. Also, unlike several of its rivals, GM will not be exiting the leasing market nor removing its incentives next month, the automaker said in a memo to its U.S.-based dealers. 

Chrysler LLC is discussing a possible tie-up with India’s Tata Motors (TTM) and Italy’s Fiat as the automaker searches for more cash and emerging market opportunities, Reuters reported. The No. 3 U.S. automaker has had talks with Tata about selling its Jeep Wrangler in India and other Asian markets, the news agency reported. Chrysler has also reportedly been discussing renting out production capacity to Fiat and cooperating in retail distribution.

Wyeth (WYE) and Elan (ELN) fell sharply over concern for their Alzheimer's drug bapineuzumab after a new clinical trial disappointed. Wyeth slid to the lowest level since 2004 on the release of the study, which raised safety and efficacy concerns among analysts and shareholders. The results caused several analysts to downgrade the stocks, including Citi, which lowered Elan to "sell" from "hold." 

Garmin (GRMN) plunged 22% after the largest U.S. maker of GPS devices reported weaker-than-expected quarterly results and slashed its 2008 outlook. The company posted an adjusted-profit of 92 cents per share, well shy of the $1.01 analysts had been looking for. Garmin lowered its 2008 outlook to a profit of $3.13 a share on $3.9 billion in revenue. Analysts were looking for $4.03 per share on $4.13 billion in sales, according to Thomson Reuters. The company also said it is delaying the launch of a smartphone called nuvifone until the second half of 2009. 

IAC/InterActiveCorp (IACI) closed sharply lower after the Internet conglomerate beat the Street with its second-quarter results. Barry Diller’s IAC reported a net loss of $421.6 million, or $1.51 a share, compared with net income of $94.6 million, or 31 cents a share, a year ago. Excluding one-time items, earnings rose to 35 cents from 34 cents. Analysts interviewed by Thomson Reuters expected earnings of 31 cents. IAC’s revenue jumped 7% to $1.6 billion, meeting estimates.

Moody's (MCO) reported a 48% decline in second-quarter profit, which topped average analyst estimates. The company's adjusted-profit was 51 cents per share, beating Thomson Reuters estimates of 47 cents. Moody's revenue tumbled 25% to $487.5 million, also topping estimates. Looking ahead, Moody's sees 2008 earnings of $1.90 to $2.00 per share, compared to average estimates of $1.92. 

Hess (HES) saw its second-quarter profit jump 62% as the oil company's earnings were a penny shy of Wall Street's expectations. Hess earned $2.76 a share, up from $1.75 a year ago. Analysts had been looking for $2.77 a share, according to Thomson Reuters data. The company's revenue soared 56% to $11.74 billion, easily beating estimates of $8.34 billion. 

Corning (GLW) fell 4% as its earnings matched estimates but it also reported a cautious sales forecast. The specialty glass maker’s adjusted-profit of 49 cents per share met the Street’s view. Looking ahead, Corning sees third-quarter sales of $1.65 billion to $1.72 billion, shy of the average $1.80 billion estimate from analysts.

World Markets

The Dow Jones Euro Stoxx 50 Index, a gauge of the 50 biggest companies in Europe, rose 42.47 points, or 1.28%, to 3367.33. The FTSE 100, London's benchmark index, gained 101.50 points, or 1.91%, to 5420.70.

On the continent, Paris' CAC 40 added 80.06 points, or 1.85%, to 4400.55, while Germany's DAX picked up 61.32 points, or 0.96%, to 6460.12.

In Asia, Hong Kong's Hang Seng gained 432.60 points, or 1.94%, to 22690.60 while Japan's Nikkei 225 rose 208.34points to 13367.79.