Stocks Extend Gains, Dow Rises 100 points

Stocks continued to rise Tuesday, nearly erasing losses from Friday's sell-off in the wake of turmoil in Egypt.

The Dow Jones Industrial Average gained more than 100 points, after posting its best January since 1997.

Pfizer, Bank of America and Alcoa led Dow components higher, while McDonald's slipped.

The S&P 500 rose more than 1 percent to reach 1,300. The last time the S&P 500 closed above 1,300 was Aug. 28, 2008, although it came close last Thursday, just before the turmoil in Egypt sent it spiraling down 1.8 percent.

The Nasdaq also advanced, rising more than 1 percent.

The CBOE Volatility Index, widely considered the best gauge of fear in the market, fell more than 10 percent to nearly 18. The VIX had climbed 24 percent last Friday as the unrest in Egypt escalated.

All key S&P 500 sectors gained, led by materials, energy and technology.

The dollar slipped against a basket of currencies, as the euro hit a 2 1/2-month high against the U.S. currency. The price of gold, meanwhile, fell below 1,330 an ounce as investors continued to flock to riskier assets.

The market gains follow subsiding fears over the unrest in Egypt, where the army on Tuesday pledged not to clamp down on protests by thousands in Cairo.

Investors will continue to monitor the political unrest in Egypt closely on Tuesday. Protesters have been calling for the resignation of President Hosni Mubarak in demonstrations that started last Tuesday.

Egypt is not a major oil producer, but nearly 3 million barrels a day moves through the Suez Canal and the Sumed pipeline, and investors fear of a contagion spreading to other oil producing countries in the region has helped spark a run in oil prices. The price of light sweet crude fell slightly to under $92 a barrel, while Brent crude rose above 101.

Earnings as well as strong euro-zone manufacturing data reported on Tuesday lifted market sentiment at the outset.

Companies representing more than half the market cap of the S&P 500 have reported earnings so far, with 71 percent exceeding their estimates, according to UBS Wealth Management Research. But unlike past quarters, UBS said, companies are beating on revenue results as well as earnings.

UPS beat analyst estimates with profit of $1.08 a share, sending its shares up more than 4 percent.

Pfizer shares gained after the pharma giant beat Wall Street estimatesand announced plans to cut its research and development spending. Pfizer did, however, also cut its forward guidance.

Energy was the strongest-performing sector on Tuesday, up 2.5 percent on rising oil prices and Exxon Mobil's strong earnings report.

BP shares remained lower after a court in the U.K. imposed an injunction on a planned planned Arctic exploration joint venture with the Russian state-controlled Rosneft.

Earlier, BP reported earnings, increasing its initial $40 billion estimate for the costs of the Gulf of Mexico oil spill by $1 billion. The company also said it would resume paying a dividend, which it had cut after the spill.

Archer Daniels Midland soared after beating quarterly earnings estimates on Tuesday amid rising grain prices and strong global demand. The agricultural processor's fiscal second quarter profits rose to $732 million or $1.14 a share, up from $567 million or 88 cents a share a year ago.

But Cummins fell despite delivering better-than-expected profits and sales from overseas markets for its engines.

Baidu shares skyrocketed after the Chinese Internet search provider reported Monday that its quarterly revenue doubled.

In other tech news, Advanced Micro Devices gained more than 4 percent after Sterne Agree boosted its rating on the chipmaker to "buy" from "neutral," citing AMD's new products and improved outlook after weathering several problems.

Intel , meanwhile, traded flat a day after the company announced it would take a $700 million charge to fix a faulty chip.

Retailers traded mostly higher despite concerns sales were hit last month by relentless wintry weatherthat kept customers at home. Retailers will report January sales later this week.

Zumiez, Jos A Bank Clothiers, Gap and Urban Outfitters all rose, although some department stores slumped, including JC Penney and Macy's.

In U.S. economic news, the Institute of Supply Management's manufacturing indexrose to 60.8 in January from 58.5 in December, and more than 58, the expected reading from economists surveyed by Reuters. The prices paid component of the index rose to 81.5 from 72.5, the highest level since July 2008.

Construction spending, however, fell 2.5 percent, the Commerce Department reported. Economists surveyed by Reuters did not expect a change in spending.

Later this session, auto sales figures will be released.

European markets rose in morning trading on Tuesday, lifted by strong earnings from Infineon and ARM which boosted technology stocks.

On Tap This Week:

TUESDAY: Earnings after-the-bell from Aflac, Broadcom and Electronic Arts.
WEDNESDAY: Weekly mortgage applications, Challenger job-cut report, ADP employment report, oil inventories; earnings from Marathon Oil, Mattel, NewsCorp., Visa and Yum Brands.
THURSDAY: Chain store sales, ECB announcement, jobless claims, productivity and costs, factory orders, ISM non-manufacturing index, Bernanke at National Press Club, Minneapolis Fed President speaks, Verizon begins iPhone pre-orders; earnings from GlaxoSmithKline, Merck, Royal Dutch Shell, Sony, Unilever, MasterCard and Sunoco.
FRIDAY: Nonfarm payrolls; earnings from Aetna.

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