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Dow closes at 5-mo high; financials jump

U.S. stocks closed 1 percent higher or more Wednesday, helped by gains in financial stocks following JPMorgan's earnings beat and a rally overseas after encouraging China trade data.

"Earnings and China seem to be outweighing soft retail sales," said Terry Sandven, chief equity strategist at U.S. Bank Wealth Management. He said the near-term bias for stocks is to approach the upper end of a trading range, "while the expectations are low and companies appear to be beating expectations."

The Dow Jones industrial average closed about 187 points higher at its highest level since Nov. 6. ( Tweet This ) The S&P 500 and Nasdaq composite also closed at their highest levels of the year so far, going back to Dec. 4 and Dec. 31, respectively.

Major averages 3-yr performance


The Dow transports closed up 2.6 percent, its best daily performance since March 17. All constituents rose with Avis Budget leading with gains of 7.5 percent.

"I think it's really just following the European bank stocks and ... weakness in the yen is also helping," said Peter Boockvar, chief market analyst at The Lindsey Group.

"We're not rallying because things are good here. We're rallying because some pressure points (from) January and February have eased up," he said, noting the gains have gone further than he expected and that "there's a real test for the market around these levels."

European stocks rose more than 2.5 percent, with the STOXX Europe 600 Bank index surging more than 6 percent.

Financials rallied 2.25 percent to lead S&P advancers, with the SPDR S&P Bank ETF (KBE) jumping 3.74 percent for its fourth-straight day of gains. Financials are the best S&P performer week-to-date but the worst for the year so far, off 3.9 percent.

Goldman Sachs, Caterpillar and JPMorgan Chase were the top contributors to gains in the Dow. JPMorgan traded more than 4 percent higher after reporting first-quarter earnings that beat on both the top and bottom line. However, quarterly profit fell for the first time in five quarters and revenue from investment banking dropped 24.5 percent, Reuters said.

The Nasdaq composite outperformed, rising 1.55 percent with Apple and Amazon.com leading major tech stocks higher and the iShares Nasdaq Biotechnology ETF (IBB) gaining 1.91 percent.

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"Basically the primary reason for the nice extended rally this morning is the China news. We saw exports come up ... and it might be a good sign that China might be turning a corner," said Peter Cardillo, chief market economist at First Standard Financial.

Asian stocks jumped, with the Nikkei 225 up 2.8 percent. The Hang Seng surged nearly 3.2 percent and the Shanghai composite gained 1.4 percent.

In the first increase since June, China dollar-denominated exports rose 11.5 percent in March from the same period last year, recovering from a 25.4 percent drop in February. Imports fell a less-than-expected 7.6 percent in dollar-denominated terms and volumes of most major commodities, notably copper and iron ore, rose strongly, Reuters said.

Read MoreWhy the China trade data is important for world markets

Copper rose nearly 1 percent. U.S. crude oil futures for May delivery settled 0.97 percent higher, or 41 cents, at $41.76 a barrel.

Earlier, oil struggled for gains, briefly topping $42 a barrel to hit a fresh high for the year so far. Weekly crude oil inventories from the EIA showed a 6.6 million barrel build, while U.S. production fell below 9 million barrels a day for the first time since late 2014.

Representatives of producing nations are set to meet on Sunday in Doha, Qatar, to discuss an output freeze.

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Treasury yields came off highs, with the 2-year yield near 0.74 percent and the 10-year yield around 1.76 percent. Earlier, both yields hit their highest since April 1.

The Treasury auctioned $20 billion of 10-year notes at a high yield of 1.765 percent.

The U.S. dollar index was about 0.9 percent higher, with the euro near $1.128 and the yen at 109.28 yen against the greenback. Earlier, the euro hit its lowest against the dollar in two weeks.

In economic news, February business inventories declined 0.1 percent. Inventories in January were revised down to show a 0.1 percent drop instead of the previously reported 0.1 percent gain.

Headline retail sales unexpectedly fell 0.3 percent in March after being unchanged in February. Ex-autos, gasoline, building materials and food services, retail sales edged up 0.1 percent after an upwardly revised 0.1 percent the prior month.

"It doesn't really change the delta on a weak consumer which we've been seeing for the last six months or so," said Marie Schofield, chief economist and senior portfolio manager at Columbia Threadneedle Investments.

"The core was good, up 0.1 percent, but it doesn't give me much strength in the view that the consumer is picking up at all," she said.

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The producer price index declined 0.1 percent in March, following a 0.2 percent decline in February. Ex-food, energy and trade services, PPI was unchanged from the prior month and up 0.9 percent in the 12 months through March.

Earlier, the Mortgage Bankers Association said total mortgage application volume jumped 10 percent last week from the previous week on a seasonally adjusted basis.

Other data due for release Wednesday included the Fed's Beige Book, which said the U.S. economy continued to expand from late February to early April and low unemployment appears to be spurring an uptick in wage growth.

Pay increased in all but one of the Fed's 12 regional bank districts and several reported signs of a pickup in wage growth, the U.S. central bank said in its Beige Book report of anecdotal information collected from business contacts nationwide.

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The Dow Jones industrial average closed up 187.03 points, or 1.06 percent, to 17,908.28, with JPMorgan Chase leading advancers and Coca-Cola the greatest laggard.

The S&P 500 closed up 20.70 points, or 1.00 percent, at 2,082.42, with financials leading seven sectors higher and telecommunications the greatest laggard.

The Nasdaq composite closed up 75.33 points, or 1.55 percent, at 4,947.42.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, fell below 14.

About three stocks advanced for every decliner on the New York Stock Exchange, with an exchange volume of 986 million and a composite volume of nearly 4.1 billion.

Gold futures for June delivery settled $12.60 lower, at $1,248.30 an ounce.

CNBC's Fred Imbert and Reuters contributed to this report.

Correction: This story was updated to reflect that the S&P 500 Wednesday closed at its highest since Dec. 4

On tap this week:

Wednesday

Earnings: Pier 1 Imports, Kinder Morgan, Noble

Thursday

Earnings: Bank of America, BlackRock, Wells Fargo, PNC Financial, First Republic Bank, Freeport-McMoRan, Snap-on, Advanced Micro, Delta Air Lines, Shaw Communications, Infosys

8 a.m. Bank of Japan Governor Haruhiko Kuroda at CFR, New York

8:30 a.m. Jobless claims

8:30 a.m. CPI

10 a.m. Atlanta Fed President Dennis Lockhart

10 a.m. Fed Gov. Jerome Powell at Senate Banking subcommittee

1 p.m. $12 billion 30-year bond auction

Friday

Tax day

Earnings: Citigroup, Charles Schwab

8:30 a.m. Empire State survey

9:15 a.m. Industrial production

10 a.m. Consumer sentiment

12:50 p.m. Chicago Fed President Charles Evans

4 p.m. Feb TIC data

*Planner subject to change.

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