Stocks Extend Gains, Dow Erases Last Week's Decline

U.S. stocks rallied Tuesday, with gains in technology stocks propelling the Nasdaq Composite to its biggest one-day percentage jump since January 2013.

The Dow Jones Industrial Average rose 215.14 points, or 1.3%, to 16614.81. The S&P 500 gained 37.27 points, or 2%, to 1941.28, marking its biggest one-day percentage gain in a year.

The Nasdaq Composite rose 103.40 points, or 2.4%, to 4419.48. Stocks closed near the highs of the session.

Gains were sparked by upbeat earnings from Apple Inc. and reports that the European Central Bank was considering buying corporate bonds. The Dow rose for its third session in a row, while the S&P and Nasdaq both notched their fourth straight session of gains.

The rebound in the last few sessions comes after a sharp pullback. The S&P fell 7.4% from its Sept. 18 record close to its recent closing low last Wednesday. The Dow declined 6.7% between its Sept. 19 record close and its recent low on Thursday. The Dow has rallied since then, with Tuesday's gains dragging the blue-chip index into positive territory for the year, up 0.2%.

"We just got oversold," said Bill Nichols, head of U.S. equities at Cantor Fitzgerald.

Tuesday's gains were bigger in the S&P 500 and the Nasdaq than in the Dow, which doesn't include Apple. The company said Monday its quarterly profit rose 13%, driven by sales of its newest iPhones. Apple also posted record sales of its Macintosh line of personal computers. Profit and revenue for Apple's fiscal fourth quarter beat expectations, pushing shares up 2.7%.

"When Apple does well, tech does well, and then the Nasdaq does well," said Aaron Jett, vice president of equity research at Bel Air Investment Advisors.

U.S. and European shares were also buoyed by reports that the ECB was considering purchases of corporate bonds, a move that would strengthen the bank's stimulus efforts. Still, The Wall Street Journal reported that no specific plan has been discussed.

The Stoxx Europe 600 jumped 2.1%. The ECB on Monday said it began buying covered bonds.

"In Europe, which has been the cause of a lot of concerns recently about slowing growth, you have the ECB acting again pretty decisively in terms of buying covered bonds," said Steve Weeple, managing director of global equities at Standard Life Investments. "You continue to see ECB policy makers do, in their own words, whatever it takes."

Mr. Weeple, who manages about $5 billion at Standard Life, said he expects ECB actions and improved U.S. corporate earnings to boost investor confidence in the U.S. stock market.

"When we looked at what was coming out, particularly out of corporate America, we felt good about the world," he said, adding that he used the recent pullback to buy his favorite stocks at a discount.

Energy stocks rose 2.9%, with the sector posting the biggest gain on the S&P 500. The sector has fallen 4.8% this month as oil prices tumbled.

Crude-oil futures rose 0.1% to $82.81 a barrel. In other commodity markets, gold futures added 0.6% to $1251.00 an ounce.

In economic news, sales of previously owned homes rose 2.4% in September to an annual rate of 5.17 million, the National Association of Realtors said Tuesday. That is higher than the 1% increase forecast by economists in a Wall Street Journal survey.

Demand for safe-haven government bonds declined, pushing the yield on the 10-year Treasury note up to 2.206%. Treasury yields rise as prices fall.

China's National Bureau of Statistics confirmed a third-quarter economic slowdown, but the 7.3% year-over-year quarterly growth rate beat expectations of a median 7.2% gain forecast by 15 economists in a Wall Street Journal survey. "We've gotten used to slowing growth rates in China," said Mr. Weeple.

U.S. corporate earnings reports continued to stream in. Harley-Davidson Inc. rose 7.3%, one of the biggest gainers on the S&P 500. The company reported a decline in profit and revenue in the third quarter, but earnings topped expectations.

Weak earnings from two Dow components limited gains for the blue-chip index.

Coca-Cola shares fell 6% after the company reported flat soda volumes in the third quarter and an unexpected decline in revenue. The company also introduced a new cost-cutting plan.

McDonald's Corp. said third-quarter earnings fell 30%, missing expectations, as the restaurant company struggles to improve global sales. Shares fell 0.6%.