NEW YORK (MarketWatch) -- U.S. stocks rallied for a second day Thursday after crude oil dropped below $131 a barrel for the first time in six weeks and as financial shares surged higher, buoyed by J.P. Morgan Chase & Co.'s financial results, which beat forecasts.
"JP Morgan announced a 52% decline in quarterly profits, but that number still exceeded expectations. This may provide enough of a reason for the more optimistic-minded among us to reason that this wave of the credit crunch may finally be behind us," said Kevin Giddis, managing director, Morgan Keegan & Co. Inc.
"If this episode has taught us anything, though, it's that we should exercise some caution before waving the 'all clear' sign," said Giddis.
In a volatile day of ups and downs, the Dow Jones Industrial Average ran up as high as 200 points after oil fell, and was last up scaled back, took a brief trip into negative turf, and then climbed higher, recently up 175 points 11,415.68, with 23 of its 30 components on the rise.
The S&P 500 rose 11.55 points to 1,256.91, with financials fronting gains among the index's 10 industry groups, up 5.3%, followed by consumer discretionary, up 2.3%.
S&P sectors on the decline included energy, down 2.9%.
The Nasdaq Composite gained 21.45 points to 2,306.3, with the technology-laden index up-and down ahead of earnings results after the close.
Software giant Microsoft Corp. is expected to post strong fiscal fourth-quarter profit and sales gains when it reports after the closing bell.
Other industry bellwethers slated to report later in the day include Google Inc. and International Business Machines Corp. .
Online auctioneer EBay Inc. weighed on the technology sector, its shares falling 15.4% after the company offered a third-quarter forecast that came under forecasts. .
Volume on the New York Stock Exchange topped 1 billion, with advancing stocks outrunning those declining more than 2 to 1. On the Nasdaq, nearly 605 million shares traded, with advancers ahead of declining stocks 2 to 1.
The ascent in stocks comes one day after stocks rallied, with the Dow tallying the blue-chip benchmark's largest point jump since April 1, as sliding oil prices and banks' upbeat results fueled optimism.
The scenario resumed Thursday as crude reversed course on gains, with the contract for August delivery down $3.9 to $130.7 a barrel, while financial shares continued to surge higher.
Within the Dow, shares of J.P. Morgan Chase climbed 10.2%, Citigroup Inc. added 7.7%, and American International Group Inc. gained 4.3%.
Shares of giant mortgage buyers Fannie Mae and Freddie Mac surged, with the former up 19% and the latter gaining 21.8%.
Coca-Cola reported a 23% decline in quarterly profit, and shares traded lower.
Nokia Corp. reported a large decline in profit, but shares of the cell phone maker gained, recently up 8.4% on improved shipments and its optimistic outlook. .
Economic data mostly supported the brightened mood.
A Commerce Department report showed that overall construction starts on homes and apartments rose in June by 9.1%, while the pace of building of single-family homes declined 5.3%. .
And, the government's count of those seeking jobless benefits climbed by 18,000 last week to 366,000, the hike still came under what analysts expected. .
Conversely, the Federal Reserve Bank of Philadelphia said manufacturing in the Philadelphia region weakened for the eighth month straight in July, defying the expectations of economists, who had predicted a slight improvement.
By Kate Gibson