Stronger earnings, weak dollar lift Wall Street

NEW YORK (Reuters) - Stocks bounced back on Wednesday on strong corporate earnings and raised outlooks, while a decline in the U.S. dollar lifted shares of materials companies.

Delta Air Lines and US Airways Group jumped after they reported strong profits, while Boeing Co buoyed the Dow after it boosted its full-year forecast.

Materials shares led the broad market higher, with Freeport-McMoRan Copper & Gold gaining 3.4 percent to $95.89 and the S&P materials index <.GSPM> rose 2.4 percent. Commodities gained as the U.S. dollar dropped to a near 15-year low against the yen.

Equities and the greenback have seen a strong inverse relationship of late with the weaker dollar boosting companies tied to resources and with businesses overseas.

"The correlation has come back strongly and much of that has to do with the Fed and the promise of asset purchases," said Quincy Krosby, market strategist at Prudential Financial in Newark, New Jersey.

The Dow Jones industrial average <.DJI> gained 163.40 points, or 1.49 percent, to 11,142.02. The Standard & Poor's 500 Index <.SPX> rose 16.14 points, or 1.38 percent, to 1,182.04. The Nasdaq Composite Index <.IXIC> climbed 29.57 points, or 1.21 percent, to 2,466.52.

Much of Wall Street's gains since the end of the summer have come from expectations the Federal Reserve will act to bolster the economy. Investors will be watching the Fed's Beige Book, expected at 2 p.m. (1800 GMT), for more clues of the central bank's thinking.

The indexes' gains came the day after stocks posted their biggest loss in two months, suggesting investors thought Tuesday's slide was overdone.

While Tuesday's selling came on a day of heavy volume -- a potentially bearish sign -- the selloff was warranted, given recent complacency in the market, said Scott Marcouiller, chief technical market strategist at Wells Fargo Advisors in St. Louis.

"Now we're testing the market to see, can it sustain this rally all day? If it doesn't, it just means we've got a little more work to do," said Marcouiller.

Delta surged 11.5 percent to $13.04 and US Airways jumped 6.5 percent to $10.75. Boeing was the biggest boost on the Dow, up 3.3 percent at $71.34.

Eaton Corp was among major industrial companies that raised their profit forecasts for the rest of the year, sending its shares up 3.7 percent at $86.48.

Earnings from the big banks were mixed. Wells Fargo & Co and US Bancorp reported higher earnings, but Morgan Stanley reported a surprise loss.

Wells Fargo rose 5.6 percent to $25.92, while Morgan Stanley overcame earlier weakness to add 0.8 percent to $25.60. Regional banks weighed on the KBW Bank Index <.BKX>, off 0.5 percent, after Marshall & Ilsley Corp reported a larger-than-expected loss. Shares of Wisconsin's largest bank lost 7.6 percent to $6.42.

(Reporting by Leah Schnurr; Editing by Kenneth Barry)

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