July 17 (Bloomberg) -- U.S. stocks rallied, sending the Dow Jones Industrial Average to its best two-day gain in almost six years, after JPMorgan Chase & Co.'s profit topped estimates and falling oil prices sparked an advance in consumer shares.

JPMorgan, the largest U.S. bank by market value, led financial shares to their biggest-ever two-day surge as profit beat estimates by 22 percent. Huntington Bancshares Inc., BlackRock Inc. and Comerica Inc. also climbed on earnings that exceeded projections. Home-improvement chains Home Depot Inc. and Lowe's Cos. led gains in all 29 companies in the Standard & Poor's 500 Retailing Index as oil slid below $130 a barrel for the first time in a month.

The S&P 500 jumped 14.96 points, or 1.2 percent, to 1,260.32. The Dow added 207.38, or 1.9 percent, to 11,446.66, bringing its two-day rally to 4.4 percent. The Nasdaq Composite Index rose 27.45, or 1.2 percent, to 2,312.3. More than two stocks climbed for each that fell on the New York Stock Exchange.

``The trade that's been the big winner has been long energy and short financials; the last couple of days maybe we're seeing a reversal of that,'' Gavin Graham, chief investment officer at Guardian Group of Funds Ltd. in Toronto, told Bloomberg Television. Guardian Group manages $5.7 billion.

For the second straight day, energy producers were the biggest drag on the market among 10 industries. The S&P 500 rallied the most since April yesterday, rebounding from the lowest level since 2005, after better-than-forecast earnings at Wells Fargo & Co. sparked a 12 percent gain in the S&P 500 Financials Index and oil extended a two-day tumble to more than $10 a barrel.

Shares in Europe and Asia rose today, sending the MSCI World Index to its biggest two-day gain since April.

Earnings Watch

Earnings surpassed analysts' estimates by an average of 6.7 percent for the 51 companies in the S&P 500 that have released second-quarter results as of the close of trading today, data compiled by Bloomberg show. The entire index trailed estimates by an average of 3.6 percent in the first quarter, a period in which the benchmark gauge of American equities slumped 9.9 percent.

Analysts as of July 11 had forecast an average 14 percent decline in second-quarter profits for S&P 500 companies, led by a 69 percent tumble in earnings at financial companies. So far, the group's earnings have slipped 4.9 percent, with financial profits declining 32 percent, Bloomberg data show.

JPMorgan added $4.86, or 14 percent, to $40.80 and contributed the most to the gain in the Dow average. The bank said second-quarter net income dropped to $2 billion, or 54 cents a share, from $4.2 billion, or $1.20, a year earlier. Earnings beat the average estimate of 44 cents by 15 analysts surveyed by Bloomberg.

Financials Climb

The JPMorgan and Wells Fargo results ``convinced people to take a look at individual banks instead of painting the whole sector with a negative patina,'' said Janna Sampson, co-chief investment officer at Oakbrook Investments LLC in Lisle, Illinois, which manages $1.4 billion.

S&P 500 financial shares rose 6.5 percent today, extending their rebound from a nine-year low on July 15 to almost 20 percent. The group accounted for nine of the 10 biggest gains in the S&P 500 today.

Comerica, the Ohio-based lender, rallied 17 percent to $28.18. Huntington, another Ohio bank, climbed 40 percent to $7.98. BlackRock, the largest publicly traded asset manager, jumped 16 percent to $208.26.

Fannie Mae, the largest U.S. mortgage-finance company, added 18 percent to $10.93 after rising 31 percent yesterday. Freddie Mac, the second-largest, climbed 22 percent to $8.33 after a 30 percent gain yesterday.

Short Sales

Securities and Exchange Chairman Christopher Cox this week told the Senate Banking Committee that the regulator would limit a type of trade in which investors bet against Fannie Mae, Freddie Mac and some of the nation's largest banks and brokerages. Cox said the SEC will require traders to hold shares before shorting 17 brokerages and the two government-sponsored mortgage buyers.

Home Depot jumped 3.1 percent to $23.38, while Lowe's added 4 percent to $20.10. Crude oil for August delivery fell $5.31, or 4 percent, to $129.29 a barrel in New York on signs slower economic growth is curbing fuel use.

``There is some hope there that we're not going to see just unending rising prices'' for fuel, said Douglas Christopher, a partner at Crowell Weedon & Co. in Los Angeles, which has $10 billion under management. ``It's why we're seeing retail and basic industry do a little better.''

General Motors Corp., the largest U.S. automaker, whose sales have been hurt by $4-a-gallon gasoline, rose 12 percent to $12.85. Southwest Airlines Co. added 2.5 percent to $14.99.

Energy Slump

Energy companies in the S&P 500 fell 1.6 percent. Coal companies, which posted the biggest gains among energy companies over the past year, retreated 9.2 percent to the lowest since May 2.

United Technologies Corp. rose $3.59 to $64.70. The maker of Sikorsky helicopters, Otis elevators, Pratt & Whitney jet engines and Carrier air-conditioners reported second-quarter profit that was higher than analysts estimated and said 2008 results will be better than it previously predicted. Net income climbed 11 percent to $1.28 billion, or $1.32 a share, boosted by overseas sales as the dollar declined against other currencies.

Barr Pharmaceuticals Inc. climbed 22 percent to $57.17, the steepest gain in almost eight years. The maker of generic drugs and the ``morning-after pill'' may be bought by Teva Pharmaceutical Industries Ltd., Israeli business newspaper the Globes reported. Teva, the world's largest maker of generic drugs, is in talks to buy Barr for $7 billion to $7.5 billion, the Globes said, citing anonymous sources.

Nokia Jumps

Nokia Oyj's American depositary receipts rallied $2.18, or 8.7 percent, to $27.31. The world's biggest maker of mobile phones reported earnings and revenue that exceeded analysts' estimates and raised its forecast for industry sales. Nokia's second-quarter profit of 37 cents a share, excluding costs, and sales of 13.2 billion euros ($21 billion), beat average analyst estimates of 36 cents on sales of 12.8 billion euros.

The market's rally may not continue tomorrow. After the close of trading, Microsoft Corp., Merrill Lynch & Co. and Google Inc. posted results that trailed analysts' estimates.

EBay Inc. fell $3.90, or 14 percent, to $24.20 for the biggest drop in the S&P 500. The world's largest Internet auctioneer said the average selling price for items on its retail sites fell 6 percent in the second quarter, slowing growth in revenue. Gross merchandise volume, the value of all goods that users sold on EBay's sites, rose 8 percent, the smallest increase since the first quarter of 1999.

Nucor Slumps

Nucor Corp. lost 11 percent to $59.81. The largest U.S.- based steel producer forecast third-quarter profit that trailed analysts' estimates. The steel-products business, which makes items such as fasteners and wire mesh, may be ``challenged'' by rising prices, Charlotte, North Carolina-based Nucor said.

Safeway Inc. fell 11 percent to $26.78, its biggest drop in five years. The third-largest U.S. supermarket chain lowered its 2008 sales forecast.

About $14 trillion has been wiped off the value of global equities since October as almost $423 billion in credit-related losses prolong the global economy's slump and rising commodity prices stoke inflation. Among the 23 industrialized nations in the MSCI World Index, only Canada averted a bear-market decline of 20 percent.

Bear Markets

The S&P 500 slid into a bear market last week as oil rose to a record and the U.S. Treasury moved to shore up Fannie Mae and Freddie Mac. Financial institutions led the index's retreat in 2008, losing 29 percent.

While the worldwide bear market slowed mergers and acquisitions by 35 percent in the first half of the year, takeovers of energy and mining companies jumped 33 percent so far this year as prices of coal and oil rose to record highs. The top eight U.S. coal producers, worth more than $50 billion, are still up for grabs.

Peabody Energy Corp.'s deposits of 9.3 billion tons, the world's largest, are worth at least $146 billion at today's market prices, while the St. Louis-based company's stock is valued at $19.6 billion on the New York Stock Exchange. Massey Energy Co.'s reserves total about $240 billion, compared with the $6.25 billion valuation of its shares.

Cleveland-Cliffs Inc. yesterday announced it's buying Alpha Natural Resources Inc., the biggest in the coal industry, for $10 billion.

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net.

Last Updated: July 17, 2008 16:36 EDT