The Dow Jones Industrial Average shot up 135.16 points (1.18 per cent) to close at 11,602.50 and the Nasdaq composite reversed earlier losses to advance 24.43 points (1.07 per cent) to 2,303.96.

The broad-market Standard & Poor's 500 index climbed 17 points (1.35 per cent) to finish at 1,277.0.

Oil prices plunged more than US$3 (S$4.08), helping to boost investor sentiment. Record-high oil prices have been weighing on consumer spending, the engine of US economic growth, as well as company profit expectations.

'The combination of falling oil prices and better-than-expected earnings reports from companies allowed the bulls to re-enter the market,' said Ms Colleen King, an analyst at Schaeffer's Investment Research.

With no economic indicators on tap, investors focused on a mixed batch of company earnings.

The financial sector, savaged since the subprime mortgage crisis erupted more than a year ago, lured investors with a series of better-than-expected results from big banks like Wells Fargo, Citigroup and Bank of America.

Wells Fargo soared 10.49 per cent to US$30.43, Citigroup climbed 6.09 per cent to 20.89 and Bank of America shot up 13.27 per cent to 32.35.

The staggering losses posted on Tuesday by banking giant Wachovia appeared to be offset by the company's moves to share up its finances.

Wachovia reported a second-quarter loss of US$8.662 billion amid a severe hit from the US housing slump and said it had written off US$6.1 billion 'reflecting declining market valuations and asset values.' Shares in Wachovia registered a whopping 27.39 per cent gain at US$16.79.

'This session saw a striking turnaround in financial stocks,' analysts at Briefing.com wrote in a client note.

'Financials were at the centre of the opening losses and the subsequent late-session rally,' they said.

Among other stocks benefiting from strong earnings and outlooks were construction equipment maker Caterpillar, up 2.39 per cent at 74.98, and aerospace giant Lockheed Martin, 2.25 per cent higher at 103.88.

On the downside, financial services group American Express slid 7.11 per cent to 37.99 and electronics firm Texas Instruments plummeted 14.62 per cent to 24.35 after reporting disappointing earnings after the market close on Monday.

Computer giant Apple slid 2.57 per cent to 162.02 after after warning on its outlook despite solid second-quarter results.

Bonds weakened, with the yield on the 10-year US Treasury bond rising to 4.097 per cent from 4.067 per cent late on Monday and that on the 30-year bond climbing to 4.663 per cent from 4.648 per cent. Bond yields and prices move in opposite directions. -- AFP