US STOCKS-Wall St rallies on earnings optimism

* Strong Alcoa profits launch earnings season

* Cost of protection in options rises

* Apple slips after consumer review

* Dow up 1.4 pct, S&P up 1.5 pct, Nasdaq up 2 pct

* For up-to-the-minute market news see [STXNEWS/US]
(Updates to close)

By Leah Schnurr

NEW YORK, July 13 (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) rallied for a
sixth straight day on Tuesday after Alcoa’s quarterly results
heartened investors that had fled to the sidelines on jitters
about the sustainability of the economic recovery.

Even so, recent low volume suggests the market’s longest
winning streak since mid-April could be running out of steam,
while the cost of protection in the options market against a
market drop keeps growing.

Alcoa Inc (AA.N: ), the largest U.S. aluminum producer and
seen as a bellwether for the economy, rose 1.2 percent to
$11.00 after it reported stronger-than-expected results and
raised its estimate for global aluminum consumption. For
details, see [ID:nN13242453]

“Many investors still are fearing deterioration in the
economy, and that’s why this earnings season is so important.
It will illuminate what comes next from the view of
management,” said Lawrence Creatura, portfolio manager at
Federated Clover Investment Advisors in Rochester, New York.

After the market’s close, Intel Corp (INTC.O: ), the world’s
largest chipmaker, reported quarterly earnings that beat Wall
Street estimates and lifted other tech stocks. Intel will
likely boost the broad market on Wednesday.

The earnings optimism on Tuesday also boosted shares of
other companies that will report earnings later this week,
including major banks. JPMorgan Chase & Co (JPM.N: ) gained 3.3
percent to $40.48, while Bank of America Corp (BAC.N: ) rose 3
percent to $15.67.

U.S. Senate Democrats appeared to nail down the votes
needed to pass a rewrite of financial regulation. If the bill
is passed, it could be a short term negative for the banking
sector, but for now the group shrugged it off, said Marc Pado,
U.S. market strategist at Cantor Fitzgerald & Co. in San
Francisco. [ID:nFINREG]

The Dow Jones industrial average (.DJI: ) gained 146.75
points, or 1.44 percent, to 10,363.02. The Standard & Poor’s
500 Index (.SPX: ) rose 16.59 points, or 1.54 percent, to
1,095.34. The Nasdaq Composite Index (.IXIC: ) jumped 43.67
points, or 1.99 percent, to 2,242.03.

The S&P 500 Index (.SPX: ) is up about 8 percent from a
recent intraday low on July 1, though trading volume has been
lackluster. Volume in the past two sessions was the lightest of
the year and although Tuesday’s volume fared better, it was
still below average.

“It’s raising new cautionary flags,” said Scott Fullman,
director of derivative investment strategy at WJB Capital
Group.

Fullman said total volume in the options pit also eased by
6.1 percent on Monday, led by a 10.7 percent drop in call
trading. The drop increased the total put/call ratio to 0.84
from 0.75, indicating more investors are betting on stocks’
fall.

Weak volume is generally viewed as an indication investors
lack conviction, but analysts noted volume has been lower since
the market started to rally in March 2009. Summer holidays can
also cause lighter trading.

COST OF PROTECTION

In the options market, a heavy put buying was detected in
an exchange-traded fund that tracks the S&P, indicating that a
trader is combining the leverage of options and ETF to obtain a
short-term insurance policy.

One investor snatched up July $35 puts on the ProShares
Ultra S&P 500 (SSO.P: ), an exchange traded fund that delivers
double the performance of the S&P 500. The heavy purchase drove
premiums to jump from 32 cents to as high as 46 cents, said
David Russell, options strategist at optionMonster.com.

Volume surged to 19,624 contracts, more than nine times
open interest in the strike. The ETF rose 3.1 percent to
$36.42, up more than 13 percent from a week ago.

Apple Inc (Read more about Apple stock future.) (AAPL.O: ) slipped 2 percent after a poor consumer
guide review for its iPhone 4 amid complaints about the
device’s reception. Apple was down at $252.11.[ID:nN13254388]

“Some of the blogs out there were speculating there was
going to have to be a full iPhone 4 recall and since then
they’ve been defended by five houses on Wall Street,” said Dave
Lutz, managing director at Stifel Nicolaus in Baltimore.

“I think the Street is anticipating Steve Jobs doing what
it takes to make it right and not have the image tarnished,”
said Lutz, who is long Apple.
(Additional reporting by Angela Moon; Editing by Kenneth
Barry)

US STOCKS-Wall St rallies on earnings optimism