Riding Financials, Stocks Gallop to the Close

Updated from 2:38 p.m. EDT

Stocks in New York finished a hesitant session with a sharp turn to the upside as the financials rallied late in the day Tuesday. The markets were further buoyed as technology stocks recovered from early losses and crude-oil prices declined.

The Dow Jones Industrial Average ended up 135.16 points, or 1.2%, at 11,602.50, and the S&P 500 rose 17 points, or 1.4%, to 1277. The Nasdaq finished up 24.43 points, or 1.1%, at 2303.96.

After Monday's close, Apple (AAPL Quote - Cramer on AAPL - Stock Picks) delivered third-quarter earnings that exceeded expectations, but it guided below the targets for the current quarter. Shares fell 10% on the news, but finished the session down 2.6% at $162.02.

Texas Instruments (TXN Quote - Cramer on TXN - Stock Picks), which missed on profits and provided a disappointing outlook, represented another technology flop, and its shares sank 14% to $24.44.

Investors had been anticipating that relief from the government stimulus package and action by the Federal Reserve would prop up cyclical and technology companies, said Matthew Smith, vice president and portfolio manager for Smith Affiliated Capital. "That just hasn't transpired."

"If you take technology, it's a pulse of the market going forward. It's basically suggesting that you're still in the early stages of a recession," said Smith.

Putting pressure on both financials and the Dow was credit card company American Express (AXP Quote - Cramer on AXP - Stock Picks), which fell short of estimates and offered cautious guidance for 2008. Its stock ended down 7.1% to $37.99.

Fellow Dow member Merck (MRK Quote - Cramer on MRK - Stock Picks) delivered an earnings beat, but didn't offer forward projections after discouraging test results emerged for the cholesterol drug Vytorin, a joint venture between Merck and Schering-Plough (SGP Quote - Cramer on SGP - Stock Picks). Merck shares stumbled 11% to finish at $31.33. Schering-Plough fell early, but finished the day 5.1% higher at $19.91.

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