OCTOBER 12, 2011, 4:26 P.M. ET.

US Stocks Close Higher; DJIA Up 102; Disney, Bank Of America Gain

By Jonathan Cheng

U.S. stocks finished with strong gains as investors gained optimism about plans to recapitalize euro-zone banks.

The Dow Jones Industrial Average advanced 102.55 points, or 0.90%, at 11518.85. The Standard & Poor's 500-stock index climbed 11.71 points, or 0.98%, to 1207.25 and the Nasdaq Composite advanced 21.70 points, or 0.84%, to 2604.73.

With the gains, the Dow is now up 5.6% higher this month--the fifth-best start to October since 1900--and is just 0.5% short of where it started the year. During Wednesday's session, the Dow rose as many as 209 points, putting it into positive territory for the year, before dropping in the final hour.

Despite the renewed appetite for risk, many market watchers argue that stocks remain locked in the same trading range that began two months ago, bouncing between Dow levels of about 10700 and 11700 as investors react to headlines from the European debt crisis and fears of a recession in the U.S. and overseas.

"For those of us that have been cautiously optimistic, this past week has felt good, but I think we're still somewhat locked in this range and are very much being driven by headlines. The only difference is that the headlines have been more positive lately," said Peter Coleman, director of research for JMP Securities.

"Clearly, we're not out of the woods yet," he said. "We're still stuck with a slow, sluggish economy and this European debt issue, and it only takes one negative shock and we could be back in recession."

Wednesday's gains were led by bank stocks, following gains by their European counterparts. J.P. Morgan Chase rose 90 cents a share, or 2.8%, to $33.20; Bank of America gained 21 cents, or 3.3%, to 6.58; and Citigroup jumped 1.36, or 4.9%, to 29.20. Industrial stocks were also strong. Caterpillar added 1.04, or 1.3%, to 81.70 and 3M gained 1.94, or 2.5%, to 78.36.

The broad gains in stocks, which pushed all but one of the 10 sectors of the S&P 500 higher, overshadowed a shaky start to the third-quarter earnings reporting season.

Alcoa was the biggest decliner among Dow components, falling 25 cents, or 2.4%, to 10.05 after the blue-chip aluminum producer unofficially kicked off the third-quarter reporting season by reporting lower-than-expected earnings. Revenues were higher than expected.

In overseas markets, Europe reversed earlier losses to turn higher. The Stoxx Europe 600 finished up 1.7% after being down as much as 1% at its intraday low. In France, the CAC-40 gained 2.4%, while Germany's DAX advanced 2.2%.

The European Commission set out its plan Wednesday to shore up European banks in the face of the region's escalating sovereign-debt crisis, including new reviews of the region's banks using a temporary higher capital ratio, a key measure of banks' ability to absorb losses.

In addition, Slovak lawmakers were regrouping to broker a deal that would remove the remaining obstacle to enhancing the euro zone's government bailout fund, after Slovakia's Parliament rejected the expansion of that fund late Tuesday.

"There's been such a lack of confidence in policy makers over the last two to three months that the hurdle is pretty low--you get some progress in the right direction and the markets are going to respond favorably," said Jeff Layman, chief investment officer at BKD Wealth Advisors in Springfield, Mo.

Asian markets were mixed. China's Shanghai Composite gained 3%, but Japan's Nikkei Stock Average slipped 0.4%.

Gold futures rose 1.3% to settle at $1,681.30 an ounce, a three-week high, while copper added 3.1%. Crude-oil futures settled at $85.57 a barrel, down 0.3% on the day, as strong gains in equity markets offset lowered forecasts for global oil demand by the International Energy Agency.

The U.S. dollar fell to a three-week low against the euro, but gained against the yen. Treasurys fell, pushing up the yield on the 10-year Treasury note to 2.226%, a six-week high.

In economic headlines, the U.S. economy had 3.06 million job openings in August, down from 3.21 million in July, while the number of people hired rose to 4.01 million from 3.98 million.

In corporate news, PepsiCo tacked on 1.75, or 2.9%, to 62.70 after the food-and-beverage company reported third-quarter earnings and revenue that exceeded estimates, while standing firm on its full-year guidance for high-single-digit earnings growth.

BlackBerry maker Research in Motion fell 53 cents, or 2.2%, to 23.88 after disruptions to service continued around the world for a third consecutive day. Problems spread Wednesday into Asian markets and some customers in the U.S. and Canada complained of backlogged emails on their smartphones.

Nasdaq OMX edged up 22 cents, or 0.9%, to 25.29 after it approved a program to repurchase up to $300 million worth of its common stock.

Liz Claiborne jumped 1.74, or 34%, to 6.84 after the company agreed to sell its Liz Claiborne, Monet and Kensie fashion brands to J.C. Penney for $328 million in cash, a move that comes as the cash-strapped apparel maker looks to reduce its debt. J.C. Penney edged up 26 cents, or 0.9%, to 30.23.

http://online.wsj.com/article/BT-CO-201 ... 13128.html