NEW YORK ( TheStreet) -- The major U.S. equity averages finished with solid gains Wednesday as investors grew progressively more optimistic about second-quarter reporting season and the Federal Reserve said economy continues to grow, albeit at a slower pace.

The central bank's Beige Book report, released late in the session, said overall economic activity in the United States "continued to expand at a modest to moderate pace in June and early July" in the majority of its 12 districts.

"The Atlanta, St. Louis, and San Francisco Districts reported modest growth, while Boston, Chicago, Minneapolis, Kansas City, and Dallas described economic activity as advancing moderately," the report said. "The New York, Philadelphia, and Cleveland Districts noted that activity continued to expand, but at a slower pace since the last report, while Richmond cited mixed activity."

The Dow Jones Industrial Average rose 103 points, or 0.81%, to close at 12,909. After falling in six straight sessions, the blue-chip index has now gained ground in the three of the past four trading days and is now up 5.66% so far in 2012.

The S&P 500 advanced 9 points, or 0.67%, to settle at 1,373. The Nasdaq added nearly 33 points, or 1.12%, to finish at 2942.60.

The market was already showing strength ahead of the Beige Book report as the latest batch of earnings reports contained few negative surprises. Most notably, Intel ( INTC) shares was able to rally more than 3% after its above-consensus profit despite the chip giant bringing down its revenue guidance for the rest of the year.

Investor sentiment also got a boost from data showing the housing market recovery is gaining momentum.

Within the Dow, 23 of the index's 30 components were moving higher, buoyed by sharp gains in Intel, Microsoft ( MSFT) and IBM ( IBM).

IBM's stock rose 2.5% to close at $188.25 ahead of its quarterly report. After the bell, Big Blue eased past Wall Street's earnings expectations for the second quarter but fell a bit short on revenue. The shares were undeterred, extending gains in after-hours trading.

The biggest percentage losers among the blue chips were Bank of America ( BAC), American Express ( AXP) and Merck ( MRK).

Bank of America lost nearly 5% after the Charlotte, N.C.-based bank said second-quarter revenue totaled $22.2 billion, down 1% year-over-year. Earnings came in at 19 cents a share for the three-month period. Analysts were expecting a profit of 14 cents a share on revenue of $22.9 billion.

In the broad market, the technology, capital goods and consumer cyclicals all charged higher, while financials were the only sector to finish in the red.

Gainers outpaced decliners by a ratio of nearly 2-to-1 on the New York Stock Exchange and 1.5-to-1 on the Nasdaq.

In other earnings news, Honeywell International ( HON) shares surged 6.67% to $58.17 after the diversified technology and manufacturing company reported consensus-topping second-quarter earnings thanks to a jump in sales at its aerospace division.

Yahoo! ( YHOO) posted quarterly earnings late Tuesday that topped expectations, but revenue came in a bit light. New CEO Marissa Mayer wasn't on the Internet company's earnings conference call. The stock ended Wednesday up 0.58% to $15.68.

According to Thomson Reuters data, the blended estimate for the second quarter, which reflects reported results and analyst expectations, is for year-over-year growth of 5.9% from the S&P 500, down from 8.1% in the first quarter. 10% of S&P 500 companies have reported so far.

Stocks also rose Tuesday as above-consensus earnings reports helped investors move past an appearance by Fed Chairman Ben Bernanke on Capitol Hill where he gave no indication that another round of quantitative easing was likely this summer. Bernanke was back on Capitol Hill Wednesday, delivering the same message to a House committee.

On the data front, there was more positive news for the housing market following the National Association of Home Builders report Tuesday of the monthly jump in homebuilder sentiment. The Department of Commerce reported that housing starts rose 6.9% in June to a seasonally adjusted annual rate of 760,000, from May's upwardly revised 711,000. Economists surveyed by Thomson Reuters expected a June pace of 745,000.

Adrian Day, president of Adrian Day Asset Management, while finding the housing market data heartening, was already mentally moving on to tomorrow's initial jobless claims report.

"Employment -- whether claims, new jobs, unemployment -- the employment picture is much more important than housing," he emphasized. "Employment is really the central thing... It also seems to be the one that the Federal Reserve, particularly Bernanke, is putting as paramount."

On the first day of his semi-annual testimony about the economy Tuesday on Capitol Hill, Bernanke cautioned that improvements in the unemployment rate will likely continue at a "frustratingly" slow pace.

"The jobs numbers tomorrow will be really important," Steve Ayer, managing director and partner at HighTower agreed. "People will be looking to see how much there is in the seasonal adjustment."

"You'll see that seasonal adjustment to be factored in and see a much higher number, but based on what that adjustment is and the severity of it," Ayer added.

Building permits fell 3.7% to a seasonally adjusted annual rate of 755,000, but from the upwardly revised May rate of 784,000. Economists, on average, expected a rate of 765,000 for June.

The FTSE in London closed up 1.01% and the DAX in Germany finished ahead by 1.62%. Hong Kong's Hang Seng index finished down 1.11% and the Nikkei in Japan closed down 0.32%.

August crude oil futures settled up 65 cents at $89.87. August gold futures lost $18.70 to settle at $1,570.80.

The benchmark 10-year Treasury was up 2/32, lowering the yield to 1.501%, while the greenback turned lower, down 0.06%, according to the dollar index.


-- Written by Andrea Tse and Alexandra Zendrian in New York.

>To contact the writer of this article, click here: Andrea Tse.