Wall Street on the upswing

Stocks gained Tuesday, rising for the third-straight session, as investors breathed a sigh of relief that some of the quarterly earnings were less terrible than had been expected.

The Dow Jones industrial average (INDU) gained 58 points, or 0.7%, closing higher for the second session in a row.

The Standard & Poor's 500 (SPX) index added 9 points, or 1.1% and the Nasdaq composite (COMP) added 15 points or 1%. Both the S&P 500 and the Nasdaq ended higher for the third session in a row.

After the close, Yahoo (YHOO, Fortune 500) reported quarterly sales and earnings that topped estimates. Including charges, the company reported a loss. Shares gained 4% in extended-hours trading.

Earnings are due Wednesday morning from Dow component AT&T (T, Fortune 500) and financial company Wells Fargo (WFC, Fortune 500). AT&T is expected to have earned 65 cents per share versus 71 cents a year ago. Wells Fargo (WFC, Fortune 500) is expected to report earnings of 33 cents per share, versus 41 cents a year ago.

Tuesday's stock gains occurred despite gloomy economic readings on home prices, employment and consumer confidence - and a slew of disappointing earnings.

"We've had some terrible numbers today, but I think the market is trying to look past the bad news and look toward the stimulus package being put forth by the Obama administration," said Robert Siewert, portfolio manager at investment firm Glenmede.

Also, investors seemed to welcome results that were not as weak as expected from American Express, Texas Instruments and others.

And Timothy Geithner's approval as Treasury secretary seemed to boost confidence that the Obama administration's $825 billion stimulus package could get passed, despite some Republican opposition.

"There's a little bit of cautious optimism in the market today, but people aren't going to make any big bets until they see what happens with the stimulus package and how Obama used the second half of the TARP money," said Paul Brigandi, vice president of trading at Direxion Funds.

"People are also looking to the FOMC meeting, not in terms of interest rates, since the Fed isn't going to do anything, but in terms of the statement and whether they announce any new initiatives," Brigandi said.

The Federal Reserve holds its two-day policy-setting meeting Tuesday and Wednesday, with an announcement expected Wednesday afternoon. The central bank is expected to keep short-term interest rates near zero, where it set them at its last meeting. However, as always, the statement that accompanies the decision will be closely scrutinized.

The negative news on the employment front continued on Tuesday as companies across the economic spectrum announced more than 10,000 job cuts.

On Monday all three major gauges managed to close higher, despite corporations announcing more than 71,000 job cuts. The S&P 500 and the Nasdaq also closed higher Friday, while the Dow closed off its lows.

The recent stock gains have followed a short, sharp retreat that saw the S&P 500 plunge 14% in just over two weeks.

That decline was partly due to a "policy vacuum" ahead of President Obama's inauguration, when it was too late for Bush to do anything and too soon for the new administration to make changes, said Richard Campagna, chief investment officer at 300 North Capital.

"What's driving the market now is that at least the administration has the ability to do something, to try to get the stimulus through," Campagna said.

Quarterly results: Dow component American Express (AXP, Fortune 500) reported lower sales and earnings late Monday that narrowly missed expectations. However, the so-called "whisper" number was much worse and investors seemed relieved that AmEx's results were not weaker. Shares gained 9.7%.

Texas Instruments (TXN, Fortune 500) reported a smaller-than-expected drop in quarterly profit after the close Monday and also said it was cutting 3,400 jobs. Shares gained 3.7% Tuesday.

A number of steel companies reported results as well. U.S. Steel (X, Fortune 500) reported higher fourth-quarter earnings and warned that first-quarter revenue would miss forecasts. But investors focused on the earnings and shares rose almost 7%.

Steel Dynamics (STLD) reported better-than-expected fourth-quarter results and said most of its divisions should see profits in 2009, thanks partly to the proposed economic stimulus plan. Shares jumped 15%.

AK Steel (AKS, Fortune 500) reported a fourth-quarter loss and warned that first-quarter revenue would miss forecasts, sending shares 8% lower.

Netflix (NFLX) also reported higher fourth-quarter revenue and said it should surpass revenue expectations in the current quarter. Shares jumped 15.5%.

Dow component DuPont (DD, Fortune 500) reported a wider quarterly loss that was worse than expected and also cut its 2009 earnings forecast. Shares ended little changed.

Dow component Verizon Communications (VZ, Fortune 500) reported higher quarterly sales and earnings, but said that growth in its mobile phone business slowed and traditional land line customers continued to drop out. Verizon also warned that pension and other retirement costs would hurt earnings in 2009. Shares fell 3.3%.

Delta Air Lines (DAL, Fortune 500) reported a steeper quarterly loss due to costs associated with its merger with Northwest and bad fuel hedges. But the world's largest air carrier said that lower fuel costs and downsizing would enable it to earn profits in 2009. Shares tumbled 20%.

Other air carriers dropped with Delta, with the Amex Airline index falling almost 7%.

Among other movers, a number of big financial stocks rallied, including Bank of America (BAC, Fortune 500), Citigroup (C, Fortune 500), Goldman Sachs (GS, Fortune 500) and Wells Fargo (WFC, Fortune 500).

Market breadth was positive. On the New York Stock Exchange, winners topped losers two to one on volume of 1.17 billion shares. On the Nasdaq, advancers topped decliners eight to five on volume of 1.83 billion shares.

Economy: Home prices in 20 major cities plunged at a record annual pace in November, falling to levels not seen since 2004, according to a report released Tuesday.

A separate report showed that consumer confidence fell to an all-time low in January. The Conference Board, a research group, said its consumer index fell to 37.7 from a revised 38.6 in December, missing economists' forecasts. It was the lowest level on record since the group began tracking confidence in 1967.

A government report showed that unemployment spiked in all 50 states and the District of Columbia in December, as companies cut thousands of positions in the wake of the recession.

Bonds: Treasury prices rallied, lowering the yield on the benchmark 10-year note to 2.54% from 2.63% Monday as investors pulled money out of the safe-haven investment. Treasury prices and yields move in opposite directions. Yields on the 2-year, 10-year and 30-year Treasurys all hit record lows last month.

Lending rates were mixed. The 3-month Libor rate held steady at 1.18%, according to Bloomberg.com. Overnight Libor fell to 0.22% from 0.23% Monday. Libor is a bank-to-bank lending rate.

Other markets: In global trading, Asian markets were mixed and most European markets ended lower.

The dollar fell versus the euro and yen.

U.S. light crude oil for March delivery fell $4.15 to settle at $41.58 a barrel on the New York Mercantile Exchange.

COMEX gold for April delivery fell $9.30 to settle at $901.40 an ounce.

Gasoline prices fell two-tenths of a cent to a national average of $1.84 a gallon, according to a survey of credit-card swipes released Tuesday by motorist group AAA.