Stocks rally on strong earnings reports

Stocks jumped Tuesday on strong second-quarter earnings from Coca-Cola, IBM and other companies.

In trading before lunch, the Dow Jones industrial average is up 124 points, or 1 percent, at 12,508. The Dow traded lower in five of the previous six trading days as Europe's debt crisis threatened to envelop Italy and as a deadlock continued in Washington over raising the country's borrowing limit.

The S&P 500 index is up 12 points or 0.9 percent, at 1,318. The Nasdaq composite index is up 44 or 1.6 percent, at 2,809.

The Dow and Nasdaq are now higher for the month. The S&P 500 index is still slightly lower.

Coca-Cola Co.'s income rose 18 percent in the second quarter on stronger sales overseas. The world's largest beverage maker raised some prices to offset higher ingredient costs. Coca-Cola's stock was up more than 2 percent.

IBM Corp. rose 3.5 percent after the technology company reported results late Monday that beat analysts' estimates. Corporate software spending held steady during the quarter.

KeyCorp rose 2 percent after the Cleveland-based banking company reported a jump in earnings thanks to a drop in loan losses. Net income of 25 cents a share was up from 3 cents a share a year ago.

Bank of America posted a second-quarter loss of 90 cents per share. That's a wider loss than analysts polled by data provider FactSet expected. Part of the loss was a result of Bank of America's 8.5 billion settlement with mortgage-bond investors. The bank's stock dropped less than 1 percent in early trading.

Goldman Sachs fell 1.4 percent. The bank's earnings more than doubled to $1.85 per share, up from 78 cents a year ago. But a drop in bond trading kept results from hitting the analysts' estimates of $2.35 per share.

Europe's banking troubles and the impasse over lifting the U.S. government's borrowing limit pummeled the stock market Monday.

Two weeks are left before the Treasury Department says the government must lift the country's $14.3 trillion borrowing limit or risk defaulting on its obligations. House Republicans are preparing to vote on a plan that would lift the debt ceiling but also slash spending. The proposal includes a balanced-budget amendment to the U.S. Constitution. President Barack Obama pledged to veto the bill.