US stocks advance after IBM profit tops estimates; banks gain

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US stocks rose and the Standard & Poor’s 500 Index rebounded from its worst six-day plunge since 1987 as better-than-estimated profit at International Business Machines Corp spurred speculation earnings will weather the financial crisis.

IBM, the largest computer-services company, climbed as much as 5.3%. Intel Corp, the biggest chipmaker, gained 2.5% . Bank of America Corp, JPMorgan Chase & Co and Alcoa Inc climbed more than 4 %. The MSCI World Index rose for the first time since October 1 after falling to its cheapest valuation in more than a decade.

The S&P 500 added 12.63, or 1.3%, to 997.57 at 9.41 am in New York. The Dow Jones Industrial Average gained 141.3, or 1.5% , to 9,399.4 and the Nasdaq Composite Index increased 28.2, or 1.6%, to 1,768.53. Five stocks rose for every two that fell on the New York Stock Exchange.

“There are problems out there, I know that, but stocks have completely overshot on the downside and are now discounting some bad economic conditions,’’ Kevin Rendino, who manages $10 billion at BlackRock Inc in Plainsboro, New Jersey said. ``There are a number of companies that offer unbelievable risk-reward potential.’’

US stocks fell on Thursday after treasury secretary Henry Paulson said more banks may collapse and unprecedented global interest-rate cuts failed to convince investors the economy will avoid a recession. Paulson signaled the government may invest in banks as the next step in trying to resolve the deepening credit crisis.

Still, the cost of borrowing in dollars for three months in London soared to the highest level this year, according to the British Bankers’ Association, indicating government actions to ease market turmoil haven’t revived lending among banks for any longer than a day.

The S&P 500’s losing streak this month was the longest since 2002 and the steepest plunge over six days since 1987.

Its year-to-date slump of 32.9% through Wednesday is the worst since 1974 and the second-biggest drop ever compared with previous returns through October 8, according to Harrison, New York-based research firm Bespoke Investment Group LLC.