S&P 500 rallies most in one year on ECB stimulus, Apple earnings

NEW YORK -- U.S. stocks surged on Tuesday, sending the Standard & Poor's 500 Index to its biggest gain in a year, as investors speculated the European Central Bank will boost economic stimulus and Apple forecast record sales.

Apple advanced 2.7 percent, sending the Nasdaq 100 Index to its biggest rally since January 2013. Texas Instruments rose 5.3 percent and Harley-Davidson jumped 7.3 percent after reporting higher-than-estimated profit. Southwest Airlines surged 5.3 percent as airlines led transportation stocks higher. Coca-Cola fell 6 percent, the biggest drop in six years, after sales slumped.

The S&P 500 climbed 2 percent to 1,941.28 at 4 p.m. Tuesday in New York, its best gain since October 2013. The equity gauge is up 4.2 percent since Oct. 15 in the biggest four-day rally since January 2013. The Dow Jones Industrial Average climbed 215.14 points, or 1.3 percent, to 16,615 on Tuesday. The Nasdaq 100 surged 2.6 percent, the most since January 2013, as about 7.2 billion shares traded hands in the U.S.

"We're hearing about the ECB buying bonds," Benjamin Dunn, president of Alpha Theory Advisors, which advises hedge funds with about $6 billion in assets, said in a phone interview from Crested Butte, Colo. "The market's a sugar addict and the sweet nectar of free money, any kind of incremental liquidity from a central bank, whether it's Europe or China, is what the market's looking for."

The ECB bought Italian covered bonds as it returned to the market for a second day under its asset purchase pro

gram, according to two people familiar with the matter. Debt issued by Intesa Sanpaolo was included in the purchases, according to one of the people, who asked not to be identified because the information is private.

The ECB entered the $3.3 trillion covered bond market after President Mario Draghi unveiled plans last month to bolster companies' and households' access to financing. Draghi, who also included asset-backed securities in the program, intends to expand the bank's balance sheet by as much as 1 trillion euros to stave off deflation in the euro area.

U.S. stocks have rallied after St. Louis Federal Reserve Bank President James Bullard said on Oct. 16 that policy makers should consider delaying the end of bond purchases. He was the first Fed official to publicly suggest the central bank should extend its asset-purchase program when policy makers meet later this month.

Bank of America Merrill Lynch strategists said in a report on Tuesday that another 10 percent decline in U.S. stocks might spark speculation of a fourth round of quantitative easing from the Fed. That would mimic how the Fed acted following equity declines of 11 percent in 2010 and 16 percent in 2011.

About 79 percent of S&P 500 companies that have reported quarterly results this season exceeded profit projections, while 61 percent beat revenue estimates. Profit for index members rose 5.9 percent in the third quarter and sales increased 4 percent, analysts projected. Broadcom and Yahoo are among the 24 S&P 500 companies reporting Tuesday. Yahoo rallied 2.8 percent in late trading.

"Now we can finally focus on earnings in the U.S.," Kully Samra, who helps manage U.K. clients at Charles Schwab in London, said by phone. His firm oversees about $2.4 trillion globally. "Apple's numbers were stunning, so that should help markets. So far, earnings numbers look OK."

The Chicago Board Options Exchange Volatility Index sank 13 percent to 16.08 for a fourth day of declines that has cut the gauge by 39 percent.

All 10 of the S&P 500's main groups advanced, led by a 2.9 percent rally among energy stocks as oil rose in New York and London.

The Dow Jones Transportation Average surged 3.1 percent, boosted by gains in airline stocks. United Continental gained 4.7 percent and JetBlue rose 2.9 percent.

Apple gained 2.7 percent. The world's most valuable company is the biggest by weighting in the S&P 500 and Nasdaq 100. Bigger-screen iPhones, refreshed and slimmer iPads and the introduction of the Apple Pay mobile-payments service are helping boost sales.

Texas Instruments increased for the sixth straight session, adding 5.3 percent. The company forecast fourth-quarter profit and revenue that may exceed analysts' estimates, as demand for chips used in cars, industrial equipment and mobile phone systems fueled sales growth.

Encouraging releases also spurred shares of other companies. United Technologies added 0.5 percent after posting better-than-estimated earnings for the third quarter. Travelers advanced 1.1 percent as operating profit surpassed projections. Illumina rallied 9.2 percent after raising its annual profit projection, the most in a year.

Harley-Davidson jumped 7.3 percent, the most since October 2012, after the biggest U.S. motorcycle maker reported third- quarter profit that topped analysts' estimates.

McDonald's lost 0.6 percent. The world's largest restaurant chain said third-quarter profit fell 30 percent as U.S. sales slumped for the fourth straight quarter. Global comparable-store sales will fall in October, Chief Executive Officer Don Thompson said in Tuesday's statement.

Coca-Cola tumbled 6 percent, the most since October 2008. The company is struggling with sluggish international growth and mounting concerns over obesity and artificial sweeteners. Sales fell to $11.98 billion in the quarter from $12 billion a year earlier, Coca-Cola said. Analysts had estimated $12.1 billion on average, according to data compiled by Bloomberg.