US stocks rose yesterday, after Merrill Lynch & Co left its dividend unchanged, a signal that strains on bank finances have eased.
The optimism surrounding the outlook for banks spread to insurance stocks, after Travelers Cos Inc, one of the largest US property insurers, raised its profit forecast. Shares of the industry leader and Dow component, American International Group, soared 7.1 percent to US$46.97.
Ford Motor Co's unexpected return to profit for the first time in three quarters offered a ray of hope for US manufacturing amid the economic slowdown.
Fresh data also helped ease worries about the economy. In the latest week, fewer people applied for US jobless benefits, while a measure of the appetite of companies to invest came in stronger than expected.
"The growing consensus is that we've seen the worst in the financial sector and the economy overall. People are willing to take more risk by getting more exposure in equities. We've seen that evidenced in today's rally," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles
The June crude oil contract fell US$2.24 to settle at US$116.06 a barrel on the New York Mercantile Exchange as the dollar strengthened and eased some worries about inflation.
The Dow Jones industrial average advanced 85.73 points, or 0.67 percent, to end at 12,848.95. The Standard & Poor's 500 Index rose 8.89 points, or 0.64 percent, to 1,388.82. The Nasdaq Composite Index gained 23.71 points, or 0.99 percent, to 2,428.92.
For the Nasdaq, yesterday's gain marked the highest close since early January.
Shares of Merrill gained 7.1 percent to US$48.09.
Positive broker views on Apple Inc also boosted sentiment. Shares of Apple, which reported results late Wednesday, rose 3.7 percent to US$168.94 on Nasdaq. Morgan Keegan upgraded the stock while several analysts raised their price targets and estimates on the iPod maker early yesterday.
Strong results in Europe helped Ford's earnings. Its stock gained 11.7 percent to US$8.40.
"It certainly was a surprise, given the overriding economic enviromment," James said.
The financial sector gave the Dow and S&P 500 their biggest boost, with the S&P index of financial shares climbing 3.8 percent.
Shares of Travelers rose 5 percent to US$50.68.
A dip of 0.3 percent in March durable goods orders, reported by the Commerce Department, was mostly due to a big drop in orders for transportation goods.
Trading was moderate on the New York Stock Exchange, with about 1.45 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.34 billion shares traded, above last year's daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by about 2 to 1 and on the Nasdaq by about 9 to 5.