msnbc.com news services
updated 5/3/2006 7:05:39 AM ET 2006-05-03T11:05:39

Solid earnings from Verizon Communications Inc. lifted stocks Tuesday, sending the Dow Jones industrial average to its best close in six years even as oil prices neared an all-time high. The broader Standard & Poor’s 500-stock index rose to a new five-year high.

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Blue chip Verizon helped the Dow to its gains after saying its profit before special items topped Wall Street estimates . Elsewhere, Sirius Satellite Radio Inc. posted a smaller-than-expected loss amid sharp subscriber gains.

There were no new economic reports released Tuesday. On Monday, data on consumer spending and industrial activity showed the economy is expanding at a healthy pace, but comments from Federal Reserve Chairman Ben Bernanke reignited worries about interest rates and triggered a late-day sell-off .

With the Fed saying it could be near the end of its rate tightening, investors have become sensitive to any inflation signs that might lead to further increases in short-term lending rates. Record energy and metals prices have some analysts questioning whether the central bank has done enough to stem inflation.

“After all of these increases, we’re really at a point of watchfulness to see if the rate hikes have been sufficient or too much,” said Susan Malley, chief investment officer of Malley Associates Capital Management. “There are fears in both directions.”

The Dow Jones industrial average closed the day up 73.16 points, or 0.64 percent, at its best close since Jan. 19, 2000. The Dow is 2.6 percent off a record high of 11,722.98. The broader Standard & Poor’s 500-stock index gained 8.02 points, or 0.61 percent, while the Nasdaq composite index added 5.05 points, or 0.22 percent.

Oil futures settled above $74 on the New York Mercantile Exchange, as traders worried that tension over Iran’s nuclear weapons program could lead to a supply cutoff from the key exporter.

Bonds recovered somewhat from a steep sell-off the day before, with the yield on the 10-year Treasury note down to 5.11 percent from 5.14 percent late Monday. The U.S. dollar fluctuated against other major currencies, and gold prices reached $670 an ounce.

Without any news on inflation or interest rates to consider, the latest batch of earnings reports gave investors more confidence about the strength of corporate profits and lent support to the market’s advance, said Brian Gendreau, investment strategist for ING Investment Management.

“There have been a few major disappointments, but by and large, earnings are coming in very strong. More than two-thirds of companies are reporting higher than expected,” Gendreau said. “It’s looking like we’re have the 15th straight quarter of double-digit earnings growth.”

Verizon’s adjusted earnings beat expectations by a penny a share. Verizon rose 38 cents to $33.17.

Sirius said its loss more than doubled last quarter , due mostly to the payment of $225 million in stock-related compensation. However, the loss was less than analysts expected, lifting shares 37 cents to $4.99.

Visteon Corp. jumped $1.18 to $7.04 after the auto parts supplier’s restructuring plan and growing worldwide business helped it swing a profit last quarter.

Automakers reported the April sales figures Tuesday . Honda Motor Co. gained $1.30 to $36.99 and Toyota Motor Corp. rose $3.65 to $121.03 on solid results, and while General Motors Corp. saw its monthly volume slide 7.4 percent, its shares nonetheless rose 57 cents to $23.21.

Hovnanian Enterprises Inc. plunged $2 to $36.78 after the homebuilder said late Monday its second-quarter results would be less than earlier forecasts because of slowing sales and production delays.

Overseas, Japan’s Nikkei stock average jumped 1.24 percent. Britain’s FTSE 100 added 0.98 percent, Germany’s DAX index gained 0.69 percent and France’s CAC-40 was higher by 1.02 percent.

The Associated Press and Reuters contributed to this report.

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