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New York - US stocks posted their biggest gains in a month on Tuesday after Coca-Cola led a round of strong earnings and concerns about Europe's debt crisis eased as Spanish bond yields fell.
Apple shares ended a five-day losing streak with a rally of 5.1%, helping the Nasdaq Composite close above 3,000. The stock closed at $609.70 and booked its best day in almost three months after it dropped 8.8% in the past five sessions.
Coca-Cola, Goldman Sachs and Johnson & Johnson all reported profits that beat analysts' estimates, in what has been a surprisingly strong start to earnings season.
"People were very pessimistic, marking down earnings expectations so there was plenty of room for the market to be positively surprised," said Paul Zemsky, the New York-based head of asset allocation at ING Investment Management.
Of the 39 S&P 500 companies that have reported earnings, 74.4% beat estimates, according to Thomson Reuters data.
International Business Machines Corp posted earnings after the bell, with investors hoping for strong software demand. The shares rose 2.3% to end at $207.45, leading the Dow in the regular session. But IBM gave up the gains after the bell.
German analyst and investor confidence rose unexpectedly in April to a high not seen since June 2010 while better-than-expected results from Spanish debt sales boosted confidence before a long-term debt auction later in the week.
ING's Zemsky said it was hard for any market to dismiss the significantly stronger-than-expected German survey.
The benchmark Spanish 10-year note's yield slipped below 6%, but worries about Madrid's finances and the banking sector are likely to keep the pressure on in coming days.
The Dow Jones industrial average rose 194.13 points, to 13,115.54 at the close. The S&P 500 Index gained 21.21 points, to 1,390.78. The Nasdaq Composite climbed 54.42 points, to 3,042.82.
In Tuesday's rally, each of the three major indexes booked their largest percentage gains since March 13.
The S&P 500 closed just shy of its 14-day moving average and easily cleared its 50-day average, suggesting a turn in momentum after the recent pullback. The benchmark dipped below the 50-day line last week for the first time in more than three months.
Although not all the stocks of reporting companies rose, the results helped ease fears that earnings could start to tail off this quarter.
Yahoo Inc also posted earnings after the bell, but the results may be overshadowed by comments from its new chief executive, who is expected to lay out his vision for the struggling web pioneer. Yahoo's stock gained 1.5% to $15.01 in regular trading and extended gains after hours.
Coca-Cola climbed 2.1% to $73.95 in regular trading and gave one of the top boosts to the Dow after the world's largest soft drink maker reported higher quarterly profit.
Goldman Sachs fell 0.7% to $116.86 after rising 2.8% during the previous four sessions. Earnings fell from a year earlier, but topped many analysts' views.
Johnson & Johnson shares edged up 0.4% to $64.22 after its quarterly profit rose more than expected even as revenue fell slightly.
This week, 86 S&P 500 companies are scheduled to report results.
More than three issues rose for every one that fell on both the New York Stock Exchange and the Nasdaq.
About 6 billion shares changed hands on the NYSE, the Nasdaq and NYSE Amex, below the year-to-date average of about 6.78 billion.
US economic reports were mixed as US housing starts fell unexpectedly in March, but permits for future construction rose to their highest level in three-and-a-half years. The PHLX housing index gained 1.53%.
US industrial output was flat for a second straight month in March, held back by a drop in manufacturing, a Federal Reserve report showed, while capacity utilization, a measure of how fully firms are using their resources, fell.
