JULY 13, 2010, 4:35 P.M. ET.

DJIA Rallies 146.75 Points, Its 6th Straight Gain

By KRISTINA PETERSON, JONATHAN CHENG And NESIL STANEY

NEW YORK—Strong earnings and encouraging guidance from corporate bellwethers pushed U.S. stocks to a sixth consecutive day of gains on Tuesday, bringing key market indexes to within a stone's throw of where they started the year.

Stocks are adding to a rally that includes the Dow Jones Industrial Average's best week in nearly a year. In the past six days, the blue-chip index has soared almost 7%—the best such run in more than 14 months. Emboldened by the strong earnings reports, investors flooded into assets with greater exposure to risk: Small-cap stocks and commodities surged, while the euro broke above $1.27.

The Dow closed up 146.75 points, or 1.44%, to finish at 10363.02, with all but one of the blue-chip index's 30 components advancing. The Dow is now less than 1% off from where it started the year, at 10428.05.

As has been the case through much of the recent winning streak, trading volumes were lower than usual, with about 4.7 billion shares trading hands in New York Stock Exchange Composite volume Tuesday, compared to a daily average of about 5.3 billion shares.

The Dow is up 6% this month and is close to wiping out the year's losses. It is now down only 0.62% for the year-to-date.

The Nasdaq Composite climbed 43.67 points, or 1.99% to finish at 2242.03, and the Standard & Poor's 500-share index rose 16.54 points, or 1.53% to close at 1095.29, just short of the key 1100 level.

The upbeat quarterly results helped assuage fears the recent rally was premature and that economic weakness would push corporate earnings below forecasts. Earnings from aluminum giant Alcoa and railroad operator CSX bolstered hopes that second-quarter results will show a strengthening business environment, though one still vulnerable to global weakness.

Owen Fitzpatrick, managing director at Deutsche Bank Asset Management, said U.S. stocks are trading at a significant discount to historical values, and don't reflect the loose credit environment and relative health of these companies. "Companies are now at low operating cost and their balance sheets never looked better," he said.

Still, with hundreds of companies set to report in the coming weeks, investor optimism could turn, said Michael Pento, senior market strategist at Delta Global Advisors.

Mr. Pento predicted executives' outlooks could show upcoming weakness even if second-quarter earnings are strong. "The projections over the next six months and 12 months wil be very difficult if you have a weak consumer, even if most of your revenue is overseas," he said. "China is slowing and Europe will have very anemic growth, if not a recession."

On Tuesday, the Commerce Department reported the U.S. trade deficit unexpectedly widened in May to its highest level of the year and Moody's Investors Service cut Portugal's sovereign-debt rating by two notches on concerns it might need new austerity measures next year. Still, the euro broke above $1.27, trading recently at $1.2715 from $1.2593 late on Monday in New York, as riskier assets gained.

As investors' confidence in riskier assets gained, demand for U.S. Treasurys declined. Treasury prices extended losses after a 1 p.m. auction of 10-year notes that generated healthy demand, but still trailed expectations. Yields on the 10-year note finished at 3.114%. Crude-oil futures gained $2.20 per barrel to settle at $77.15, while gold prices gained 1.2% to finish at $1213.30.

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.Among Dow components, Caterpillar led the measure's gains, rising 3.9%. Major banks strengthened too, after lawmakers said they had secured enough support to vote on the financial-overhaul bill potentially later this week in the U.S. Senate. Once passed, regulators will nail down key details, clarifying issues that banks would like to see resolved. J.P. Morgan Chase rose 3.3%, while Bank of America was up 3.0% and American Express rose 3.1%.

Alcoa, the first Dow component to report earnings, gained 1.2% after the aluminum giant reported a $136 million profit on stronger-than-anticipated 22% revenue growth. It also hiked its global aluminum consumption forecast.

Pfizer dropped 0.9% after the California Supreme Court reinstated a lawsuit dismissed by lower courts in which retail pharmacies accused Pfizer and other major drug makers of conspiring to set prices at artificially high levels.

Stocks are aiming to gain for a sixth straight session as as second quarter earnings from Alcoa and CSX spark optimism about the earnings season and outlook for the second half. This comes despite a report showing small businesses continue to feel highly pessimistic about the U.S. economy. Paul Vigna, Madeleine Lim and Michael Casey discuss
.American International Group rose 6.8% following news that the insurer's biggest private shareholder, Bruce Berkowitz, increased his stake. Shares in MBIA were up 11.5% in recent trading after Mr. Berkowitz also disclosed an 11% stake in the bond insurer.

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