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CAT Leads Dow; Automakers Rally

Stocks rebounded Wednesday as Caterpillar led the Dow, automakers rallied and banks posted solid gains.

The Dow Jones Industrial Average and S&P 500 were up about half a percent, while the tech-heavy Nasdaq gained more than 1 percent amid anticipation of Apple earnings after the bell.

Stocks got off to a rocky start as investors digested the latest batch of earnings. This came after a rally Tuesdayas investors cheered comments from Treasury Secretary Tim Geithner that most banks are well capitalized.

Caterpillar was the Dow's biggest percentage gainer after JPMorgan raised its rating on the stock to "overweight."

And Boeing advanced after the aerospace giant beat earnings expectations.

Automakers rallied after the Obama administration said Tuesday it will make $5 billion available to General Motors and another $500 million for privately held Chrysler to help the companies get back on their feet.

Chrysler may be able to reduce its debts by offloading shares to some of its lenders. The troubled automaker’s first-lien lenders have offered to write off about 35 percent of the $7 billion owed in exchange for a stake in the company.

Shares of GM jumped about 5 percent, while Ford gained more than 10 percent.

But credit worries continued to trouble the market after Capital One reported earnings that were worse than expected and said it was feeling the pressure of defaults.

Capital One shares fell more than 3 percent while Dow component American Express lost more than 1 percent.

Wells Fargo gained more than 1 percent after the bank reported record earnings of $3.05 billion.

Morgan Stanley skidded more than 5 percent as the investment bank said credit troubles hampered earnings. The company's loss of 57 cents a share badly missed expectations of an 8-cent loss, and it cut its dividend to 5 cents a share.

In other earnings news, Continental and

Fellow Dow component AT&T reported earnings of 53 cents a share, beating Wall Street expectations by a nickel.

Altria reported earnings of 39 cents per share that were about in line with expectations.

“The proof is in the pudding and that’s earnings … It’s pretty easy for these companies to look good because all the analysts are expecting the worst,” Jared Levy, senior derivatives strategist from Peak 6 Investments, told CNBC.

European shares got a boost from bank stocks in early trading, but the Asian market ended mixed as investors remained cautious.

This Week:

WEDNESDAY: Weekly crude inventories; Earnings from AT&T, Boeing, McDonald's, Morgan Stanley, Wells Fargo, Altria, Ingersoll-Rand, Kimberly-Clark, Apple, eBay, Qualcomm and Yum! Brands
THURSDAY: Weekly jobless claims; existing-home sales; Earnings from Conoco-Phillips, GlaxoSmithKline, Pepsi, UPS, Fifth Third, Marriott, PNC Financial, SunTrust, Union Pacific, US Air, Microsoft, Amazon, AmEx and Burlington Northern
FRIDAY: G-7 meeting in Washington; durable-goods orders; new-home sales; Earnings from 3M,Honeywell, Schlumberger and Xerox

Send comments to cindy.perman@nbcuni.com.