Dow Rises 187 Points as Profits Look Rosy

By JONATHAN CHENG

Investors again demonstrated the power of positive thinking on Wednesday, driving U.S. stocks near three-year highs and snapping up growth-sensitive assets like copper and the Australian dollar.

Strong earnings from the technology sector and a bigger-than-expected rise in existing-home sales sent the Dow Jones Industrial Average to a nearly three-year high Wednesday. Joe Bel Bruno has details.

After a shaky start to the week, when Standard & Poor's issued a warning on the U.S. credit rating, stocks have rebounded. The Dow Jones Industrial Average soared 186.79 points, or 1.52%, to finish at 12453.54, its highest close in nearly three years. The blue-chip index is now 12% from its all-time high.

Stocks were also up in Europe and Asia. Much of the optimism on Wednesday was driven by strong earnings from U.S. companies including Intel and Yahoo. That helped refocus investors away from worries about the U.S. debt burden. As well, gold again rose above $1,500 an ounce before drifting back to close at a new record $1,498.30. Oil rose 2.9% and the Australian dollar reached a fresh record, trading at $1.0646 late Wednesday.

Investors have grown increasingly confident in the global economic recovery, despite a series of market-rattling events that has tested investors' nerves. The gains have defied skeptics, who have for months been declaring a correction is nigh.

Stocks are climbing sharply Wednesday, wiping out the week's earlier losses, as blow-out quarterly earnings from Intel and IBM broadly lifted technology companies. Paul Vigna and George Stahl discuss. Plus, market analysis from UBS's Mike Ryan.

"In the background, there's a strong tide at work," said David Kelly, chief market strategist for J.P. Morgan Funds. "Two years ago, there was an overreaction to the crisis—companies were laying off too many workers, investors were moving too much into cash and bonds. Now, there's a growing belief the U.S. economy is on the mend, and a lot of people need to reposition back to normal."

On Wednesday, investors sold safe-haven assets including Treasury bonds and the dollar, which sank to new multiyear lows against its rivals. The euro posted its biggest one-day gain in three months, rising to $1.4511, a 15-month high. The U.S. Dollar Index, which measures the greenback against a basket of six other currencies, is now at its lowest point since November 2009.

First-quarter corporate earnings on average are on track to beat analysts' estimates, following a pattern of the past several quarters.

Intel, the largest maker of computer chips, late on Tuesday issued a strong forecast, pushing its stock up 7.8%. The earnings helped lift technology stocks globally, helping South Korean stocks reach a fresh record. The Nasdaq Composite posted its biggest one-day point gain since September, gaining 57.54 points, or 2.1%, to 2802.51.

After the market close on Wednesday, Apple released earnings that topped analysts' revenue and profit estimates. The stock jumped 4.2% in after-hours trading, adding to the day's 1.4% advance.

Many multinationals, including Johnson & Johnson and Citigroup, reported robust gains in their international markets.

"There's been an enormous increase in global consumer spending—you can see that in Intel's business, Citigroup's business and Johnson & Johnson's business," said Burt White, chief investment officer at LPL Financial in Boston. It's been off-the-chart good."

The specter of rising commodity prices hasn't factored prominently in corporate outlooks, providing further solace to investors concerned about input-price pressures and profit margins.

Global giants in manufacturing and heavy industry fared particularly well on Wednesday. Caterpillar surged 2.5%, Boeing added 2.6%, 3M gained 2.1% and United Technologies rose 4.3%.

Major U.S. stock indexes are now in positive territory for the week and the month. On Monday, the Dow fell nearly 250 points in intraday trading after S&P lowered its outlook on U.S. government debt, underscoring Washington's fiscal bind.

"So far this week, the best investment has been a neck brace," said Alan Gayle, senior investment strategist with RidgeWorth Investments.

Both Tuesday and Wednesday, however, saw strong data points from the U.S. housing sector, a moribund corner of the economy that many investors had already written off.

"When I think about what's really holding the U.S. economy back, it's confidence—and housing is absolutely the center of that," said Mr. Kelly of J.P. Morgan. "In the past two days, we've had better-than-expected numbers on housing starts and existing home sales, and that's why people are feeling better about growth in the U.S."

Mr. Gayle of RidgeWorth said the S&P debt warning is hurting the dollar, which in turn has boosted prices for commodities like copper, silver, gold and oil—all of which are priced in dollars.

Amid optimism about global growth, crude oil mounted its biggest one-day advance since the escalation of Libyan hostilities last month, finishing 2.9% higher at $111.45 a barrel. The surge lifted oil producers, which saw their stocks soar.

Copper jumped 2.6% and silver reached a new 31-year high.

Mike Ryan, UBS Wealth Management's Chief Investment Strategist, gives us his take on today's big rally in stocks as well as his outlook for the markets.