Stocks rise as earnings beat estimates

Stocks rallied on Wednesday after Chairman Ben Bernanke reiterated the Federal Reserve is ready to do what is necessary to keep the economy from slipping back into recession.

The Dow Jones Industrial Average rose for the third time in the past four sessions, up 103.16 points to 12,908.70. The Nasdaq Composite Index gained 32.56 points to 2,942.60, and the S&P 500 stock index rose 9.11 points to 1,372.78.

The markets were also encouraged by a report from the Commerce Department showing that new home construction rose by 6.9 percent in June to an annualized rate of 760,000 units, after a revised 711,000 rate in May that was faster than initially estimated. Building permits, a sign of future activity, declined slightly.

Oil rose to a seven-week high on Wednesday, gaining 65 cents to $89.87 a barrel.

Gold fell for the third consecutive session, down $18.70 to $1,570.80 an ounce.

Bernanke said during his second day of testimony to Congress that the U.S. fiscal situation is “unsustainable.” The central bank said in its survey, which is based on reports from its 12 district banks, that the world’s largest economy expanded at a “modest to moderate” pace in June and early July, as retail sales and manufacturing cooled in some regions.

“There’s some reduced pessimism about the earnings season and the outlook going forward,” said Peter Tuz, who helps manage about $800 million as president of Chase Investment Counsel Corp. in Charlottesville, Va. “People were expecting worse numbers from lots of companies.”

Earnings have exceeded analyst estimates at 73 percent of the 63 companies in the S&P 500 that have reported results so far, according to data compiled by Bloomberg. Profits have slumped 4.6 percent for the group, and the entire index is projected to report a 2.1 percent decrease in earnings.

Technology and industrial companies had the biggest gains Wednesday, rising 1.9 percent and 1.7 percent, respectively. Technology companies “were oversold and due for a bounce,” said Mark Luschini, chief investment strategist for Philadelphia-based Janney Montgomery Scott LLC, which manages about $54 billion. Earnings reports weren’t “as bad as people had expected them to be. That was enough to invite investors to come in and scoop up some attractive names.”

Intel (Nasdaq: INTC) rallied 3.3 percent to $26.21 after reporting that second-quarter profit was 54 cents a share, exceeding the average analyst estimate by 2 cents. The world’s largest semiconductor maker also scaled back its annual sales forecast as personal-computer demand fails to rebound among consumers in the United States and Europe.

“Intel lowered guidance, but it was not unexpected and not disastrous,” said Michael James, a managing director of equity trading at Wedbush Securities Inc. in Los Angeles, in an email. “Intel’s leading the technology group higher.”

Honeywell (NYSE: HON) gained 6.7 percent to $58.18. The company reported second-quarter profit that beat analysts’ estimates, driven by sales in its aerospace unit. The company, which sells airplane parts from navigational systems to brakes, is benefiting from an increase in aircraft production as Boeing Co. (NYSE: BA), Airbus SAS (NYSE: BA) and other plane makers seek to whittle down large backlogs of orders.

EMC Corp. (NYSE: EMC) surged 9.4 percent to $25.08. The software company said Pat Gelsinger will succeed Paul Maritz as chief executive officer of VMware Inc. (NYSE: VMW), giving new management the task of pursuing new products and stepping up growth at the software maker under its control. Maritz will return to EMC, which owns 79 percent of VMware, as chief strategist. VMware jumped 12 percent to $89.98.

Amphenol Corp. (NYSE: APH) rallied 15 percent to $58.94 for the biggest gain in the S&P 500. The maker of fiber-optic cables lifted its forecast for earnings this year to as much as $3.44 a share from no more than $3.38. That compares with the average analyst estimate of $3.34.

New York Stock Exchange: nyse.com

Nasdaq Stock Market: nasdaq.com