Data, Strong Earnings Boost Stocks

Stocks rallied Tuesday, breaking a streak of four straight down sessions, as nvestors welcomed cheered better-than-expected earnings from key companies and some long-awaited good news on inflation.

The Dow Jones industrial average (search) rose 56.16 points, or 0.56 percent, to end at 10,127.41. The Standard & Poor's 500 Index (search) was up 6.80 points, or 0.59 percent, to close at 1,152.78. The Nasdaq Composite Index (search) was up 19.44 points, or 1.02 percent, to finish at 1,932.36.

"It's a broad, good rally. It's better quality than yesterday and that's despite oil being higher. That says to me that we've probably made a short-term bottom on Friday and were oversold enough to return to the primary trend, which is moderately higher," said Al Goldman, chief market strategist at A.G. Edwards.

Stocks dropped sharply last week to 5 1/2-month lows and had a lackluster session Monday. The extent of the decline, however, encouraged some investors to jump back into the market to snap up beaten-down stocks.

Investors had feared that the Labor Department's (search) Producer Price Index (search), which measures wholesale prices, would show inflation taking hold in the economy. But while the PPI rose 0.7 percent for March due to energy and food prices, "core" PPI without those volatile costs grew just 0.1 percent, less than the 0.2 percent hike Wall Street expected.

"We're finally seeing some numbers that point to less inflation in the pipeline," said Lincoln Anderson, chief investment officer at LPL Financial Services in Boston. "Coupled with a pretty strong earnings outlook for the quarter, this hopefully puts a floor on the market and gets things turned around again. The fundamentals of the economy remain good."

In another report, the Commerce Department (search ) said housing starts plunged 17.6 percent in March, marking their steepest drop in more than 14 years, as groundbreaking for both single-family and multifamily homes tumbled.

Both sets of data eased worries that the economy is moving at a pace that would worsen inflation and prompt the Federal Reserve to raise interest rates faster than expected.

After the closing bell, Intel Corp. (INTC), the world's largest chip maker, reported a rise in quarterly profit as revenue reached the second-highest level in the company's history. Intel shares jumped 3 percent, or 68 cents, to $23.31 on the Inet electronic brokerage from a Nasdaq close at $22.63.

"Intel is the barometer for the tech industry and if they're doing well, people are going to assume that the markets that their customers serve are doing well," said Ray Rund, managing director and head of research at Shaker Investments, who doesn't own Intel stock.

Among stocks gaining was Coca-Cola (KO), which rose 3.5 percent, or $1.43 to $42.40 after the world's largest soft drink maker reported quarterly earnings that exceeded analysts' expectations.

Texas Instruments (TXN) lifted tech shares a day after the world's largest maker of chips for cell phones, reported higher profit and said the pace of new orders picked up. It climbed 5.5 percent, or $1.25, to $24.17.

The Philadelphia Stock Exchange semiconductor index was up 1.74 percent.

Energy stocks rose as the oil price jumped. Exxon Mobil (XOM) shares rose 2.4 percent, or $1.38 to $58.63. ChevronTexaco gained 1.4 percent, or 74 cents to $53.34.

Shares of energy companies also benefited from Banc of America repeating its "overweight" rating on oil and gas exploration and production companies, and UBS raising its 2005 and 2006 oil and gas price forecasts.

Some manufacturing stocks rose, with 3M Co. (MMM) rebounding after a sharp drop Monday when it posted disappointing global sales. Shares of 3M rose $1.03, or 1.4 percent, to $76.93. On Tuesday, 3M Chief Executive W. James McNerney said he has no plans to leave the diversified manufacturer "in any foreseeable time frame" for another CEO job.

Drug maker and Dow industrial Pfizer Inc. (PFE) had a far worse quarter, with profits plunging 87 percent due to numerous one-time charges related to suspending sales of its pain reliever Bextra due to health risks. Charges aside, Pfizer still beat Wall Street forecasts by a penny per share. Pfizer was down 18 cents at $27.42.

Struggling automaker General Motors Corp. (GM) lost 10 cents to $26.09 after reporting a $1.1 billion quarterly loss. The Dow component's quarterly results, the worst since 1992, were hammered by spiraling healthcare costs and disappointing North American sales, but the company nonetheless beat Wall Street's sharply reduced loss estimates by a penny per share.

Wall Street firm Merrill Lynch & Co.'s (MER) profits fell 3 percent, primarily due to March's shaky stock market, but still surpassed analysts' estimates by 3 cents per share. Merrill Lynch, which also announced a dividend hike and stock buyback program, climbed 80 cents to $54.04.

Trading was heavy, with 1.70 billion shares changing hands on the New York Stock Exchange, above the 1.46 billion daily average for last year. About 1.87 billion shares were traded on Nasdaq, above the 1.81 billion daily average last year.

Advancers outnumbered decliners on the New York Stock Exchange by about 3 to 1 and by about 7 to 3 on Nasdaq.

The Russell 2000 index of smaller companies was up 9.61, or 1.6 percent, at 594.94.

International markets recovered somewhat after Monday's sharp losses, triggered by last week's Wall Street selloff. Japan's Nikkei stock average rose 1.16 percent, while in Europe, Britain's FTSE 100 closed up 0.27 percent, Germany's DAX index gained 0.06 percent, and France's CAC-40 climbed 0.32 percent for the session.

Reuters and the Associated Press contributed to this report.