Debt Hopes Trigger Dow's Best Day of 2011

FOX Business: The Power to Prosper

Wall Street cheered progress on the debt ceiling negotiations, upbeat corporate earnings and positive housing data, propelling the Dow to its best daily performance this year.

Today's Markets

The Dow Jones Industrial Average soared 202 points, or 1.6%, to 12,587, the S&P 500 climbed 21.3 points, or 1.6%, to 1,327 and the Nasdaq Composite rose 61.4 points, or 2.2%, to 2,827. The FOX 50 rose 14.5 points to 940.

The so-called "gang of six" U.S. senators proposed a plan that would cut the budget deficit by $3.75 trillion over the next decade and reform the tax code.  If the deal, which received a nod from President Barack Obama, garnered broad approval from Congress, it could break the deadlock over raising the debt ceiling, which has been looming over Wall Street for weeks.

"Anything that pointed to a completion of the debt ceiling debate was going to be treated as a positive," said Frederic Dickson, chief investment strategist at D.A. Davidson & Co.

Traders also focused on a bout of corporate earnings and economic data. Additionally, International Business Machines' (NYSE:IBM) blockbuster performance helped boost traders' sentiment on the day.

New housing starts leaped 14.6% to an annualized rate of 629,000 in June, easily beating estimates of 575,000.  Permits to build new homes increased by a slower 2.5% to an annualized rate of 624,000, also topping forecasts of 600,000.

The industry for new homes has been struggling to recover because of a glut of houses on the market, and generally poor housing market conditions.  Homebuilers like KB Home (NYSE:KBM) may be particularly affected by these data.

Earnings' 'Halo' Effect

IBM leaped 5.7% -- its biggest percentage gain since March 2009, which added roughly 70 points to the Dow's 202 point rally.  The computing behemoth revealed a full-year profit outlook that topped analysts forecasts and instilled confidence that it would adapt to quickly-changing hardware and software preferences after the close of trading on Monday.

Upbeat earnings by numerous big-name companies "essentially put a halo over the market on the earnings front," Dickson said.

Dow components Bank of America (NYSE:BAC),  Johnson & Johnson (NYSE:JNJ) and Coca-Cola (NYSE:KO) all reported before the opening bell.

BofA unveiled a net loss of $8.8 billion, or 90 cents a share, compared with a profit of $3.1 billion, or 27 cents, the year prior.  The biggest U.S. bank by assets' loss was in line with analysts expectations.

Johnson & Johnson (NYSE:JNJ) posted a profit of $1.28 a share, excluding charges, on $16.6 billion in sales. Wall Street was expecting the maker of medical products to earn $1.24 a share on $16.23 in revenue.

Coca-Cola (NYSE:KO) posted net income of $1.17 a share, excluding one-time charges, on $12.7 billion in sales. The beverage maker beat earnings expectations by a penny, and topped earnings expectations by 360 million.

Goldman Sachs (NYSE:GS) earned $1.85 a share on revenue of $7.3 billion, far shy of estimates of $2.27 a share on $8.14 billion in sales.  Shares of the investment banking giant pared early losses, though, still closed lower.

Technology behemoth Apple (NASDAQ:AAPL) is set to reveal its earnings after the closing bell.

Energy markets got a bounce after slumping in the prior session.

Light, sweet crude jumped $1.57, or 1.6%, to $97.50 a barrel.  Wholesale RBOB gasoline climbed 2 cents, or 0.56%, to $3.11 a gallon.

Consumer gasoline prices were stable overnight, but have been on a trend higher.  A gallon of regular gasoline costs $3.68 on average nationwide, up from $3.65 last month and well higher than the $2.72 drivers paid last year, according to the AAA Fuel Gauge report.

Gold fell $1.30, or 0.08%, to $1,601 a troy ounce after settling at an all-time high on Monday.  Silver fell 12 cents, or 0.3%, to $40.22 a troy ounce.

In the foreign exchange market, the euro gained 0.23% on the U.S. dollar, while the greenback fell 0.46% against a basket of world currencies.

Corporate News

News Corp. (NASDAQ:NWSA) top executives Rupert and James Murdoch testified before U.K. parliament amid a widening investigation into a phone hacking scandal that forced the shutdown of the News of the World. News Corp. owns a slew of media entities including FOX Business Network and FOX Business.com.

Wells Fargo (NYSE:WFC) unveiled profits of 70 cents a share on $20.4 billion in sales for the second quarter, topping earnings forecasts of 68 cents, but falling slightly short of the $20.5 billion revenue expectation.

Foreign Markets

European shares snapped back after selling off in the prior session.

The English FTSE 100 gained 0.65% to 5,790, the French CAC 40 jumped 1.2% to 3,695 and the German DAX climbed 1.2% to 7,193.

In Asia, the Japanese Nikkei 225 fell 0.85% to 9,890 and the Chinese Hang Seng rose 0.45% to 21,902.