NEW YORK - US shares rebounded yesterday after a global equity sell-off last week, as optimism about earnings resurfaced and concern about credit conditions eased.
Financial shares, which have borne the brunt of fallout from tightening credit markets, bounced back after ratings agency Standard & Poor's upgraded MorganStanley's debt.
Sentiment about the sector also improved after the bailout of a hedge fund steeped in sub-prime mortgage market losses and a home-lending unit of GMAC reported narrowing losses. General Motors shares rose 4.9 per cent, boosting the Dow.
Overall, analysts now expect a stronger second quarter than just a week ago. Expectations for quarterly earnings growth by Standard & Poor's 500 companies were raised to 6.8 per cent compared with the year-ago period from 6 per cent, according to Reuters Estimates.
"Maybe people had some time to reflect over the weekend, took a deep breath and saw that second-quarter earnings have been good - we're comfortably beating the modest expectations," said Doug Peta, market strategist at J&W Seligman in New York.
The Dow Jones industrial average gained 92.84 points, or 0.70 per cent, to end at 13,358.31.
Stocks had traded erratically throughout the day before the rally gathered steam in the afternoon.
Shares of industrial companies gained after Ingersoll-Rand said it planned to sell its Bobcat machinery business and two other units to South Korea's Doosan Infracore.
But worries about the housing slump lingered. Trading in American Home Mortgage Investment was halted on the NYSE after its shares plunged in electronic trading before the market opened.
The mortgage lender said its banks demanded more margin after it wrote down the value of its mortgage and security portfolios. American Home Mortgage had plunged 39 per cent before the opening bell to US$6.39.
