Stocks Soar on Rate Outlook, Earnings; Dow Up Nearly 200 Points

The three major U.S. stock indexes posted their best gains in a year Tuesday, driven by a surge in energy shares after oil prices hit a record high and as the Fed eased concerns about rising interest rates.

The Dow Jones industrial average jumped 194.99 points, or 1.76 percent, to 11,268.77. The Standard & Poor's 500 Index gained 22.32 points, or 1.74 percent, to 1,307.65. The Nasdaq Composite Index climbed 44.98 points, or 1.95 percent, to 2,356.14.

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Minutes released in the early afternoon from the Federal Reserve's most recent policy-setting meeting extended stocks' early gains and gave the rally more momentum as they reaffirmed views that the central bank is nearly done with raising interest rates.

Solid earnings from companies, including Merrill Lynch & Co. Inc. (MER), contributed to the market's upward momentum.

Oil prices hit a new all-time high above $71 a barrel as anxiety mounted that Iran's nuclear standoff with the West could cut oil exports from the world's fourth-largest crude exporter. Shares of major energy companies like Exxon Mobil Corp. (XOM) surged.

"It would be a welcome relief to the stock market should the Fed's continuing rate increases come to a halt," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

Advancers outnumbered decliners on the NYSE by a ratio of almost 4 to 1 — the Big Board's best day for market breadth in nearly two years. On the Nasdaq, about five stocks rose for every two that fell.


After the closing bell, IBM (IBM), the world's biggest computer-services company, said quarterly profit rose amid lower costs and strong sales of advanced microprocessors for video game machines. Shares of International Business Machines Corp. rose to $83.40 on the Inet electronic brokerage system from a close at $83.31 on the New York Stock Exchange.

And Yahoo Inc. (YHOO), the world's biggest Internet media company, reported after the close that its quarterly net profit declined amid higher stock option expenses. Still, Yahoo's stock rose to $32.25 on Inet from a Nasdaq close at $31.30.


During the regular session, the Dow average raced up 206.67 points from Monday's close to Tuesday's session high at 11,280.45 late in the afternoon — extending the brisk rally after the Fed's minutes were released.

U.S. crude for May delivery rose 95 cents to settle at $71.35 a barrel in New York, after hitting a session high at $71.60 — the highest since energy futures began trading on the New York Mercantile Exchange in 1983.

Shares of Exxon Mobil gained 2.4 percent, or $1.49, to $63.54. ConocoPhillips (COP) shares climbed 3.4 percent, or $2.31, to $70.64. Both trade on the New York Stock Exchange.

U.S. Treasury debt prices also rose following the minutes, which were from the March 27-28 meeting where policy-makers raised interest rates for the 15th time since June 2004. The Fed lifted its trend-setting federal funds rate by a quarter percentage point to 4.75 percent at the conclusion of the March meeting.

The benchmark 10-year U.S. Treasury note was up 9/32 at a price of 96-11/32. Its yield, which moves in the opposite direction of its price, fell to 4.98 percent — down from 4.99 percent just before the Fed's minutes were released — and below Monday's late yield of 5.01 percent.

Many analysts now think the Fed may stop after one or two more rate increases. Rising rates are often negative for stocks because they raise borrowing costs for corporations and consumers.

The Dow Jones index of home builders shares rose 4.4 percent on the belief that the end of the Fed's cycle of raising rates may be near. An index of bank stocks gained 2.1 percent.

Merrill Lynch, the largest U.S. brokerage firm, posted higher-than-expected quarterly profit, helped by strong investment banking and retail brokerage revenue. Merrill Lynch shares rose 1.2 percent, or 92 cents, to $79.38 on the NYSE.

Volume was heavy on the New York Stock Exchange, where about 1.84 billion shares changed hands, above last year's daily average of 1.61 billion. On the Nasdaq, about 2.28 billion shares traded, above last year's daily average of 1.80 billion.

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