JANUARY 14, 2011, 2:38 P.M. ET.

DJIA Reaches 2-1/2 Year High

By DONNA KARDOS YESALAVICH

Stocks reached the highest levels in two and a half years after strong earnings from J.P. Morgan Chase helped rally the financial sector.

The Dow Jones Industrial Average rose 57 points, or 0.5%, to 11788 in recent trading, reaching its highest intraday level since June 2008. The gain put the Dow industrials up 0.9% for the week, on pace to extend the measure's winning streak to a seventh week.

J.P. Morgan Chase led the Dow's climb with a 3.2% jump. The banking company posted a 47% jump in fourth-quarter profit, beating analysts' expectations as revenue increased and loan-loss reserves were sharply reduced. The results boosted sentiment for Bank of America, which is due to release its fourth-quarter earnings next week. It rose 3.2%.

Intel slipped 0.7%, even though its fourth-quarter earnings rose 48%, topping analysts' views. Investors said they were unsure how much longer Intel will be able to post such strong numbers amid a weakening personal-computer market. Intel shares had climbed earlier in the week ahead of the report.

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.The Nasdaq Composite added 0.5% to 2750. The Standard & Poor's 500 index gained 0.6% to 1292.

The financial sector led to the upside, boosted by J.P. Morgan's report. PNC Financial Services Group climbed 4.5%, Morgan Stanley added 2.5% and Wells Fargo rose 2.4%.

But the materials sector fell, with Newmont Mining down 2.2% and AK Steel off 1.9%, amid worries about the potential impact to demand from tightening in China. China's central bank said it will raise banks' reserve-requirement ratio by 0.50 percentage point, following six such increases last year, in the government's latest move to curb inflation.

U.S. economic data came in mixed, with readings on the consumer weaker than expected while measures of the business sector showed improvement.

U.S. retail sales posted a smaller-than-expected increase of 0.6% in December, while the Reuters/University of Michigan consumer sentiment index's preliminary reading for January unexpectedly fell.

Meanwhile, there was a smaller-than-expected increase in U.S. business inventories due to strong holiday sales that drew down supplies, while industrial production and capacity utilization improved more than expected.

"It's one of those tales of two markets," said Margie Patel, senior portfolio manager of the Wells Fargo Advantage Diversified Income Builder Fund. "The business sector is a pillar of strength. Consumers are still relatively weak."

Still, some said the weaker-than-expected retail-sales numbers were more of an indication that estimates had gotten too high.

"The retail sales are a little soft," said Doug Cote, senior market strategist with ING Investment Management, but he noted total retail sales have recouped much of their losses from the recession.

"The expectations were too high," he added. "The market is just overly optimistic."


Bloomberg News
.The euro rose to $1.3354, from $1.3351 late Thursday as worries about euro-zone finances continued to ease following successful bond placements of Portugal, Italy and Spain this week. Also providing a boost, the European Union decided in principle to increase the support mechanism for cash-strapped member states and help to support the euro, European Commissioner Michel Barnier said.

The U.S. Dollar Index, tracking the U.S. currency against a basket of six others, was flat. Treasurys fell, lifting the yield on the 10-year note up to 3.32%. Crude-oil futures rose while gold futures slipped.

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.Among stocks in focus, Coinstar tumbled 25%. The company, which operates coin-counting stations and redbox DVD-rental kiosks, slashed its financial outlook for the fourth quarter and current year. The company has been hurt by weak holiday rentals and a delay it has had to put on some new DVD releases.

Sterling Bancshares climbed 2.8%. The bank has put itself on the auction block, The Wall Street Journal reported, citing people familiar with the situation.

Write to Donna Kardos Yesalavich at donna.yesalavich@wsj.com

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