Earnings drive late rally

An afternoon rally lifted stocks solidly into the black Tuesday as investors uneasy about the economy were reassured by solid earnings from some well-known firms.

The Dow index gained more than 100 points, and most broader indexes also scored healthy gains.

Technology stocks were among the biggest winners after Apple surpassed analysts’ expectations with a 67% jump in fiscal fourth-quarter profit on strong sales of Macintosh computers, iPods and iPhones.

Two Dow components – financial services giant American Express and chemicals maker DuPont – posted better-than-expected profits as well.

But DuPont Chief Executive Charles O. Holliday Jr. said the company didn’t expect a recovery in the housing market next year, reminding investors of a key risk to the economy.

“Housing is obviously still a big concern, and the question is how much does it spill over into the rest of the economy,” said Alexander Paris, an economist at Chicago-based Barrington Research.

The National Assn. of Realtors today will report data on sales of existing homes in September, and the Commerce Department will report new-home sales Thursday.

Still, some market bulls weren’t deterred Tuesday. The Dow Jones industrials rose 109.26 points, or 0.8%, to 13,676.23.

Broader stock indicators also had solid gains. The Standard & Poor’s 500 index added 13.26 points, or 0.9%, to 1,519.59; the Nasdaq composite surged 45.33 points, or 1.7%, to 2,799.26.

The Russell 2,000 index of smaller companies rose 8.45 points, or 1%, to 818.53.

Advancing issues led decliners by 2 to 1 on the New York Stock Exchange.

Investors’ mood might have been helped by a third straight drop in oil prices. Near-term crude futures in New York slipped 75 cents to $85.27 a barrel on expectations of rising U.S. inventories.

Treasury bond yields were little changed as some investors moved back into stocks. The yield on the benchmark 10-year T-note fell to 4.40% from 4.41%.

In the municipal bond market, California said retail investors put in orders for $1.17 billion of the state’s $7-billion sale of short-term tax-free notes. The notes, expected to pay an annualized yield of about 3.4%, will mature in June.

Brokerages will continue taking retail orders today. Institutional investors will bid for the notes Thursday.

In other trading, the dollar resumed its slide against most other major currencies while gold rebounded.

Tuesday’s stock rally extended into a second day the market’s recovery from its plunge Friday, which capped five straight down sessions on worries about corporate earnings and the effect of tighter credit on the economy. The Dow sank 367 points, or 2.6%, on Friday.

Upbeat earnings reports encouraged investors Tuesday.

Apple soared $11.80, or 6.3%, to a record $186.16 after the company reported late Monday that it shipped a record 2.16 million Macs in the quarter, up 34% from the same period a year earlier. The stock is up 119% this year.

American Express said late Monday that higher spending by cardholders pushed third-quarter profit up 10%. Its shares rose $1.79, or 3.2%, to $58.66.

DuPont posted a larger profit for the third quarter, helped by growth in its businesses outside the U.S., and the company boosted its full-year outlook. The stock rose 24 cents to $46.81 but was off its high for the day of $48.

Among the day’s market highlights:

* Tech shares rallying with Apple included Google, up $25.02 to a record $675.77; IBM, up $1.31 to $114.68; and Cypress Semiconductor, up $1.65 to $35.27.

Research in Motion, maker of the BlackBerry e-mail phone, soared $11.15 to a record $124.53 after saying it would begin selling its units in China.

* On the downside, Texas Instruments sank $2.84 to $31.43 after the chip maker gave a disappointing sales forecast.

* AT&T gained 85 cents to $42.02. It reported that quarterly profit jumped 41%, helped by cost cutting.

Other stocks climbing on earnings reports included rail giant Union Pacific, up $4.71 to $129.96, and mutual fund firm T. Rowe Price, up $4.04 to $58.73.

* Coach slumped $4.87 to $36.60 after the maker of luxury leather goods said consumer traffic in its stores had been weak in recent weeks, suggesting a spending slowdown.

Polo Ralph Lauren slipped $1.26 to $67.01.

* Some investors rushed back into shares of industrial companies and commodity producers, which are bets that economic growth outside the U.S. will remain strong. Deere jumped $5.03 to $149.87 and mining firm BHP Billiton rose $2.94 to $83.88.

* Pasadena-based Jacobs Engineering surged to $84.80 in after-hours trading, after Standard & Poor’s said it would add the stock to the S&P 500 index Thursday. Jacobs had risen $2.14 to $81.69 in regular trading.

* Shares were higher in many foreign markets. Key stock indexes climbed 3.5% in Hong Kong, 0.8% in Britain, 0.6% in Germany and 2.4% in Brazil.