The Dow advanced Wednesday after a quick drop at the open as investors digested a mixed bag of earnings.
The Dow Jones Industrial Average, S&P 500and Nasdaq were all up more than 0.5 percent.
The CBOE Volatility Index, widely considered the best gauge of fear in the market, dropped to just above 20. The gauge hasn't been below 20 since August 2008. At the height of the crisis in October and November of that year, the VIX topped 80.
DuPont, American Express and Alcoa were the top three gainers on the Dow.
At the back of the Dow pack was Boeing, which lost more than 1 percent after the aerospace giant missed analysts' earnings target and lowered its guidance.
Eli Lilly beat expectations on both earnings and sales of prescription drugs and raised its outlook. But shares fell as they didn't raise the fourth-quarter outlook by as much as they beatin the third.
Elan rose after the drug maker raised its earnings guidance for the year.
In the financial sector, Wells Fargo and Morgan Stanley both beat analyst estimates but investors were split. Wells Fargo shares fell as losses from bad loans reached $5.1 billion. Morgan Stanley shares climbed as the brokerage reported its first profit in a year, helped by investment-banking fees.
The Nasdaq opened higher after Yahoo and SanDisk's beat earnings expectations. Yahoo's beat had a lot to do with cost-cutting but it also gave an upbeat forecast.
"You have to view Yahoo's cup as being half full rather than being half empty," Gartner analyst Allen Weiner told Reuters. "They seem positioned for a turnaround with the deal with Microsoft and with branding. They are pretty well-positioned to make a comeback in Q4. These numbers are not going to hurt them."
Flash-memory maker Sandisk also delivered an encouraging forecast, saying orders are strong for the current quarter.
This followed similar outlooks from Intel and Texas Instruments, citing signs of improvement in business spending.
And Dell says PC sales should start to get a boost from Windows 7 starting in mid-2010.
The problem for the market right now is that, while a lot of companies are beating estimates, few are delivering what analysts — and traders — want to see.
"What we really need to see is better profit margins, better sales numbers, which means that the US consumer is coming back," Simon Grose-Hodge, director and investment strategist at LGT Bank in Liechtenstein, said on CNBC today.
The equity rally can continue but "the drivers will definitely change in the next couple of quarters," Franz Wenzel, senior investment strategist at AXA Investment Managers, added. "We think that the junk rally — which has pushed markets higher throughout this year — will peter out and that the quality stocks — individual quality stocks — will basically take over the lead," he predicted.
Sun Microsystems said it's cutting 3,000 jobs ahead of the planned takeover by Oracle .
Freeport-McMoRan shares rose after the gold and copper miner reported its profit soared in the third quarter, helped by higher metals prices and volume. Though revenue slipped.
The euro traded above $1.50 for the first time since August 2008 today, while gold fell below $1,056 a troy ounce.
Oil fell, trading below $79 a barrel, after a report showed crude inventories rose by 1.3 million barrels.
Earnings season rolls on with a week that will ultimately see 25 percent of the S&P 500 report their quarterly numbers.
On the M&A front, General Electric and Comcast said they were continuing discussions about a possible deal but that there was no timetable for completion. GE shares slipped.
US Bancorp is considering acquiring FBOP, which owns eight banks and could be put up for sale by the Federal Deposit Insurance Corp, according to a report in the Wall Street Journal.
Morgan Stanley may hand over its Crescent Real Estate Equities unit to Barclays Capital, the Journal reported.
And Geely Automotive's talks to buy Volvo from Ford Motor have reportedly stalled.
In economic news, the Fed said economic conditions either stabilized or improved in most of the country, according the Fed's "beige book" report, based on reports from its regional branches.
This morning, the Mortgage Bankers Association reported another drop in home-loan applications as interest rates continue to edge higher.
Still to Come:
WEDNESDAY: Earnings from eBay after the bell
THURSDAY: Weekly jobless claims; leading indicators; Fed's Rosengren, Lockhart and Dudley speak; Earnings from AT&T, Bristol-Myers, McDonald's, Merck, MMM, Travelers, UPS, Schering-Plough, Xerox, Amazon, AmEx, Braodcom and Capital One
FRIDAY: Fed chief Bernanke speaks; existing-home sales; Fed's Kohn speaks; Earnings from Microsoft, Honeywell and Ingersoll-Rand
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