The Dow Jones Industrial Average vaulted 207.38 points (1.85 per cent) to close at 11,446.66, a day after a powerful rally of more than 2.5 per cent.

The tech-heavy Nasdaq composite lifted 27.45 points (1.20 per cent) to 2,312.30 and the Standard and Poor's 500 climbed 14.96 points (1.20 per cent) to 1,260.32.

The S&P banking index was up some 8.7 per cent, extending its recovery, after JPMorgan Chase, like Wells Fargo a day earlier, reported that its quarterly profits fell but not as much as feared.

Sentiment also was boosted by another sharp fall in crude oil prices.

New York's main oil contract, light sweet crude for August delivery, lost US$5.31 (S$7.18) to close at US$129.29 a barrel. It has tumbled more than US$15 since Monday.

'Oil more than any other single item could be a positive catalyst for the market as lower energy costs would help to relieve pressure on consumers,' said analyst Gregory Drahuschak at Janney Montgomery Scott.

The market was led by JP Morgan Chase, which reported a 53 per cent drop in net profit from a year ago to US$2.0 billion dollars which was comfortably above the Wall Street estimate and positive news for the banking sector ravaged by a housing crisis and credit squeeze.

'This rally may have legs that could extend for more than a couple of sessions if we continue to get a stream of better-than-expected earnings news from leading companies in sectors that had been under duress,' said Mr Fred Dickson, analyst at DA Davidson & Co.

'Wells Fargo's report yesterday and JP Morgan Chase's report this morning are good examples of banks delivering essentially lousy earnings but substantially beating estimates thereby sending a message that the situation in the financial sector isn't quite as bad as Wall Street previously feared.'

JP Morgan Chase shares soared 13.5 per cent to US$40.80 after its earnings report, leading the sector higher. Citigroup, due to report results on Friday, added 9.1 per cent to US$17.97 while Bank of America rallied 16.9 per cent to 26.50.

Fannie Mae and Freddie Mac extended their rebound from last week's near-meltdown that prompted a government rescue plan and the opening of the Federal Reserve discount window lending to the mortgage finance giants.

Fannie shares leapt 18 per cent to US$10.93 dollars and Freddie jumped 21.9 per cent to US$8.33. -- AFP