Stocks Close With Huge Rally As Oil Plunges

Stocks ended sharply higher, sending major indexes to their biggest one-day advance in more than three months, as upbeat quarterly results from Wells Fargo eased credit concerns and a $4 slide in oil prices calmed inflation worries.

The major indexes each were up substantially, with the tech-gauge Nasdaq up 2.6 percent, the blue-chip Dow ahead nearly 2 percent and the Standard & Poor's 500 more than 1.5 percent on the plus side.

Financials gained across the board after Wells Fargo brought a surprise in earnings. Meanwhile, airlines, transportation stocks and automakers also benefited, after being beaten down by the rabid increase in oil prices.

Oil prices fell dramaticallyafter a report showed a surprising increase in crude supplies, indicating that demand was falling and conservation measures were taking hold.

"We got the follow-through that we looked for with these numbers," Tom Reiley, of SCS Commodities, said on CNBC. "It looks like the bubble may have burst for the short term."

Once the oil drop took hold, investors mostly shrugged off a Consumer Price Index reading showing thatprices in June rose by the biggest amount since 1982on a continued surge in gasoline prices.

The bank rally began early when Wells Fargo , the fifth-largest US bank, posted earnings of 53 cents per sharewhich, though lower than a year ago, beat analyst expectations.

At the same time, the company said optimism about for the future will lead to a 10 percent dividend increase.

Other bank stocks posting strong gains included Washington Mutual and Bank of America. Dow bank stocks gained more than 7 percent.

Also, Delta Air Lines reported a $1 billion quarterly loss after special charges, as the airline industry continues to struggle with sky-high fuel prices.

But excluding special charges, Delta said it earned $137 million, or 35 cents per share, easily beating analyst estimates. Airline stocks gained 13 percent, led by Continental, which surged more than 30 percent.

Metals stocks were being hit by rising materials costs, with the Dow Iron & Steel sector falling 4 percent.

Major energy producers suffered from oil's losses, with ExxonMobil and Chevron showing sharp decreases.

Conversely, General Motors skyrocketed as the automaker led Dow gainers while Exxon was the biggest loser.

Fannie Mae and Freddie Mac recovered after the Securities and Exchange Commission issued a rule to curb short selling in 19 financial firms and major investment banks, in an effort to clamp down on market manipulation which some say has played a role in the fall of Bear Stearns in March.

Market breadth was positive, with gainers beating losers 2 to 1.