Stocks Rebound as Oil Prices Tumble

Updated from 9:45 a.m. EDT

Stocks on Wall Street were showing some life Tuesday as traders began to process a stack of fresh earnings statements, watched oil prices continue to decline and greeted with optimism the sale of mortage-backed bonds by Merrill Lynch (MER Quote).

The Dow Jones Industrial Average was climbing 118 points to 11,249, and the S&P 500 was adding 13 points to 1248. The Nasdaq tacked on 40 points to 2304.

Last time out, the three major indices sold off steadily throughout the day as a series of mediocre earnings statements failed to counteract continuing fears about the health of the financial sector. The Dow and the Nasdaq both lost at least 2%, and the S&P dropped 1.9%.

Helping the rebound was another drop in crude oil, which was continuing its recent slump. Lately, futures were dropping $3.71 to $121.02 a barrel, the lowest level since May. Gold was losing $10.50 to $927.30.

Following the end of previous session, Merrill Lynch announced that it would be selling to an affiliate $30.6 billion in collateralized-debt obligations for $6.7 billion. The company, which has in recent quarters been troubled by the tough-to-value assets, also said it will raise $8.5 billion in capital through a stock offering and take a $4.4 billion pretax charge-off in the third quarter.

Meanwhile, biotech company Amgen (AMGN Quote) delivered earnings that beat expectations, as did agricultural chemicals concern Mosaic (MOS Quote).

When the new trading day arrived, investors received financial results from another series of companies, including steel producer U.S. Steel (X Quote), which announced that its second-quarter profit more than double thanks to its ability to pass increasing raw-material costs on to clients.