Solid earnings, Obama optimism push Wall St up

Solid earning results from companies including IBM and Coca-Cola and optimism by President Barack Obama about a new proposal toward raising the US debt ceiling allowed for a positive tone in equity markets on both sides of the Atlantic.

In afternoon trading, the Dow Jones Industrial Average climbed 1.64 per cent, the Standard & Poor's 500 Index advanced 1.62 per cent and the Nasdaq rose 2.11 per cent.

Investors drew confidence from Obama's endorsement of a new deficit-reduction proposal by a bipartisan group of senators. Obama said there was "progress" and that the plan was "broadly consistent" with the administration's efforts.

There was also good news on the earnings front as investors rewarded better-than-expected results released by IBM and Coca-Cola.

"Everything out of the earnings box continues to drive the message that from the corporate side, things are pretty good all across the board," James Dunigan, chief investment officer in Philadelphia for PNC Wealth Management, told Bloomberg News.

"It's early in the season, but that daily dose of the micro side feels a little better than investing against a macro, political backdrop," he said.

The S&P 500 fell 4.3 per cent through yesterday from a three-year high in April, which the gauge trading at 14.8 times reported earnings, the cheapest this month, according to data compiled by Bloomberg.

In Europe, the Stoxx 600 Index gained 0.8 per cent. The index is trading at about 12.5 times the reported profits of its companies, near the cheapest since 2008, according to Bloomberg.

All eyes are on Thursday's meeting of euro zone leaders as they are trying to complete an agreement on a second round of aid for Greece worth 110 billion euros (US$154 billion), though German Chancellor Angela Merkel said expectations for one final solution were unrealistic.

"Further steps will be necessary and not just one spectacular event which solves everything," Merkel told a joint news conference on Tuesday with visiting Russian President Dmitry Medvedev, Reuters reported.

Even so, the euro climbed to US$1.42172 on trading platform EBS. It last traded at US$1.4133, 0.2 per cent stronger on the day.

Markets are "desperate for any details indicating resolution ahead of Thursday's meeting," Eric Theoret, currency strategist at Scotia Capital in Toronto, told Reuters. "Headline risk for the euro remains high."

The euro last 0.9 per cent higher at 1.1640 Swiss francs.

After setting a record earlier in the session, gold prices pared gains and were on track to end an 11-day rally. Spot gold was at US$1,601.11 as of 1626 GMT. Earlier it reached a record US$1,609.51.

"People are just stepping back ... we are going to end the week with the same concerns that we came into the week with, and people realise that," Zachary Oxman, managing director with TrendMax in Encinitas, California, citing the increased buy-orders that flowed in when prices dipped below US$1,600, told Reuters.

Brent crude rose US$2.11 to US$118.16 a barrel at 1.31pm EDT.

Crude was underpinned by expectations the International Energy Agency would not release emergency stocks for a second time.

Although the IEA hasn't reached an official decision, there were no signs of a shortage to warrant a second dip into member countries' emergency oil reserves, traders and analysts told Reuters.