Big day on Wall Street
Intel's upbeat outlook and the Fed's improved forecast spark a big advance with all three major gauges up at least 3%.
Why Louisville, CO is No. 1NEW YORK (CNNMoney.com) -- Stocks surged Wednesday, with all three major gauges jumping at least 3% after Intel's forecast for a second-half pickup and the Federal Reserve's improved outlook reassured wary investors.
The Dow Jones industrial average (INDU) gained 256 points, or 3.1%. The S&P 500 (SPX) index added 27 points, or 3%. The Nasdaq composite (COMP) rose 63 points, or 3.5%.
Both the Dow and Nasdaq saw their best one-day point gains in nearly four months. The S&P 500's gain was the best in two months.
Intel (INTC, Fortune 500) reported profit and revenue late Tuesday that dipped from a year ago, but surpassed forecasts. Also, the chipmaker predicted better revenue growth in the third and fourth quarters thanks to improved demand for personal computers.
With corporate demand still tepid, Intel's outlook will depend on consumers continuing to buy despite rising oil and gas prices and the ongoing recession. However, even with that caveat, investors embraced the forecast.
"The good news about Intel is the forecast," said Kevin Mahn, managing director at Hennion & Walsh. "We know second-quarter results won't be very good for most companies, but we want to know the outlook is improving in the second half of the year."
The rally intensified after the Federal Reserve said Wednesday afternoon that the end of the recession might be on the horizon.
The advance was also a matter of "performance chasing," said Phil Dow, director of equity research at RBC Wealth Management. "You have record low levels of stock ownership and so on these kinds of days you see people pile in."
He said that while the start to the financial reporting period was positive, it is too early to do a victory lap regarding second-quarter results.
"So far you've seen a little better guidance," he said. "If that proves to be true through the rest of the reporting period, this could be the quarter that the economy turns around. But I don't think we're going to see that just yet."
Thursday: JPMorgan Chase (JPM, Fortune 500) releases its quarterly financial report before the start of trading. The company is expected to report a profit of 4 cents per share versus 54 cents a year ago.
Small-business lender CIT Group (CIT, Fortune 500) will also be in focus. The federal government could be set to announce a bailout of the struggling company within the next 24 hours.
On the economic front, the Philadelphia Fed index, a monthly manufacturing report, is due shortly after the start of trading.
RealtyTrac's report on foreclosure filings in the first half of the year is due in the morning. Additionally, the weekly jobless claims report from the Labor Department is on tap.
Google (GOOG, Fortune 500) and IBM (IBM, Fortune 500) report results after the close Thursday.
Profits set to drop: S&P 500 profits are expected to have fallen around 36% in the second quarter versus a year ago, according to the latest Thomson Reuters forecast.
Worries about the corporate earnings outlook and the health of the economy have dragged on stocks over the last month -- following a three-month rally that lifted the S&P 500 by 40%.
Mahn said Intel and Goldman Sachs were the first signs since that selloff began that maybe the economy is getting back on track after all.
Fed: In the afternoon, the Fed released the minutes from the last policy meeting and the forecast through 2010.
Information reviewed at the meeting showed the economy remained weak, although the pace of the decline seemed to be lessening.
In its forecast, the Fed said that the unemployment rate could top 10% this year, but it also said that the recession may soon end.
Intel: Intel shares jumped 7% and boosted other big tech stocks.
Dow tech components Microsoft (MSFT, Fortune 500), IBM (IBM, Fortune 500), Cisco Systems (CSCO, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500) all gained. Big Nasdaq tech stocks gained too, including Oracle (ORCL, Fortune 500) and Applied Materials (AMAT, Fortune 500).
Among other movers, oil stocks jumped in line with the underlying commodity prices. Dow component Chevron (CVX, Fortune 500) rose 2.5% and Exxon Mobil (XOM, Fortune 500) gained 3.4%.
Banks on the move: On Tuesday, Goldman Sachs (GS, Fortune 500) reported a bigger-than-expected quarterly profit due to strength in its fixed income and trading businesses.
Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) and JPMorgan Chase report results either Thursday or Friday.
Goldman and the other three bank stocks rallied, along with other big financial firms American Express (AXP, Fortune 500), Morgan Stanley (MS, Fortune 500) and Wells Fargo (WFC, Fortune 500).
The KBW Bank index gained 4.3%.
Economy: The consumer price index (CPI), a measure of consumer inflation, edged up 0.7% in June after rising 0.1% in May, according to a government report released in the morning. Economists surveyed by Briefing.com thought it would rise 0.6%.
So-called core CPI, which strips out volatile food and energy prices, grew 0.2% versus a rise of 0.1% in May. Economists thought it would rise 0.1%.
Industrial production fell 0.4%, according to another government report, versus forecasts for a drop of 0.6%. Industrial production fell 1.2% in May. Capacity utilization dipped to 68% from 68.2% in the previous month. Economists thought it would dip to 67.9%.
Bonds: Treasury prices fell, raising the yield on the benchmark 10-year note to 3.56% from 3.47% Tuesday. Treasury prices and yields move in opposite directions.
Other markets: In global trade, Asian markets ended higher and European markets ended higher.
In currency trading, the dollar fell against the euro and gained versus the Japanese yen.
U.S. light crude oil for August delivery rose $2.02 to settle at $61.54 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery rose $16.60 to settle at $939.10 an ounce.
Market breadth was positive. On the New York Stock Exchange, winners beat losers by more than nine to one on volume of 1.37 billion shares. On the Nasdaq, advancers beat decliners by almost five to one on volume of 2.58 billion shares. 
