NEW YORK - US stocks rallied on Wednesday, giving the Dow its second-best day of the year, as Federal Reserve Chairman Ben Bernanke's comments on inflation suggested the central bank may be close to ending two years of interest-rate increases.

Stock investors took their cue directly from the Fed chairman, who told the US Senate Banking Committee that he saw core inflation moderating in the coming quarters. That set off a burst of buying that resulted in a single-session record number of stocks advancing on the New York Stock Exchange and drove the S&P 500 back up into positive territory for the year.

Financial stocks, which climbed after news of strong earnings from JPMorgan Chase & Co. and Bank of America Corp., got another boost from the central banker's comments.

"The combination of Bernanke's comments, strong earnings from banks and a drop in oil prices swept the stock market," said Weston Boone, vice president of listed trading at Stifel Nicolaus Capital Markets in Baltimore. "This was a very good day, with a broad rally."

The Dow Jones industrial average shot up 212.19 points, or 1.96 per cent, to end at 11,011.42. The Standard & Poor's 500 Index jumped 22.95 points, or 1.86 per cent, to finish at 1,259.81. The Nasdaq Composite Index gained 37.49 points, or 1.83 per cent, to close at 2,080.71.

APPLE GAINS, INTEL DROPS AFTER THE BELL

Some of the largest US technology companies reported earnings after the market closed.

Apple Computer Inc. said quarterly profits rose 48 per cent, topping analysts' estimates. In after-hours trading, Apple's stock climbed 3 per cent to US$55.75 on the Inet electronic brokerage system from a Nasdaq close at US$54.10.

Shares of Motorola Inc. also rose after the world's second-biggest cellphone maker, said its second-quarter earnings and revenue increased. Motorola advanced 5.5 per cent to US$20.30 on Inet from a close at US$19.25 on the New York Stock Exchange.

But Intel Corp., the world's largest chipmaker, posted a sharply lower second-quarter profit.

Intel shares fell 4 per cent in after-hours trading to US$17.75 from a Nasdaq close at US$18.49.

SERENDIPITY FOR BANK STOCKS

During the regular session, shares of JPMorgan, a Dow component, rose 5.8 per cent, or US$2.34, to US$43.05, while Bank of America's stock added 3.1 per cent, or US$1.51, to US$49.95 on the NYSE. The Philadelphia Keefe Bruyette & Woods index of bank stocks climbed 3 per cent.

The blue-chip Dow and the Nasdaq extended gains and rose more than 2 per cent in the afternoon on news that a US judge struck down a Maryland health-care law in a ruling that was favorable to Wal-Mart Stores Inc.

Shares of Wal-Mart, a Dow component and the world's largest retailer, rose 2.4 per cent, or US$1.03, to US$44.20.

Still, the Dow's biggest gainer was Boeing Co. Shares of the aircraft maker and US defence contractor rose nearly 4 per cent, or US$3.12, to US$82.29 as the company and Airbus announced deals worth more than US$10 billion on Wednesday.

International Business Machines Corp. also was among the Dow's best-performing stocks, a day after the world's largest computer services company reported higher-than-expected quarterly profit. IBM shares rose 2.4 per cent, or US$1.81, to US$76.07.

After Bernanke spoke, interest-rate futures pointed to reduced chances that the Fed will hike the benchmark fed funds rate by 25 basis points in August to 5.50 per cent.

PAINFUL DAY FOR YAHOO

But shares of Yahoo Inc., the internet media company tumbled after a disappointing earnings report and product delays led many Wall Street analysts to cut stock ratings and profit estimates.

Yahoo was among the Nasdaq's biggest percentage losers. It slid 21.8 per cent, or US$7.04, to US$25.20.

Bernanke told the Senate committee that the central bank remained worried about pricey oil and tight labor markets and the risk that they might foster expectations for rising prices.

Analysts said fighting in the Middle East remained a major concern for markets because of the risk that a widening conflict could propel crude oil prices higher.

US crude oil for August delivery fell 88 cents to settle at US$72.66 a barrel on the New York Mercantile Exchange.

Trading was heavy on the New York Stock Exchange, where about 1.87 billion shares changed hands, above last year's daily average of 1.61 billion. On Nasdaq, about 2.43 billion shares traded, above last year's daily average of 1.80 billion.

On the NYSE, advancing shares outnumbered declining ones by a ratio of more than 6 to 1, with more than 2,900 stocks rising on the Big Board, a record for a single day.

On Nasdaq, about four stocks rose for every one that fell.

- REUTERS