NEW YORK - WALL Street staged a strong rebound on Wednesday amid a surge in battered banking stocks and troubled mortgage giants Fannie Mae and Freddie Mac, with a sharp drop in oil also boosting sentiment.

The Dow Jones Industrial Average vaulted 276.74 points (2.52 per cent) to close at 11,239.28.

The tech-heavy Nasdaq composite leapt 69.14 points (3.12 per cent) to 2,284.85 and the Standard and Poor's 500 rallied 30.45 points (2.51 per cent) to 1,245.36.

'Additionally, stronger-than-expected results from the likes of Wells Fargo and Intel pushed the beaten-down market into positive numbers.' The banking sector led the charge, with an index of banking shares jumping more than 16 per cent after Wells Fargo reported a stronger-than-expected profit of US$1.8 billion (S$2.43 billion), easing fears about the sector.

Mr Fred Dickson, analyst at DA Davidson, said upbeat earnings reports 'suggest to investors that a significant portion of the companies in the US economy still are profitable, have solid balance sheets and are enjoying various amounts of growth.'

Oil prices plunged, extending this week's spectacular losses after a surprise jump in crude reserves in the United States. New York's main oil contract, light sweet crude for August delivery, shed US$4.14 to close at US$134.60 a barrel.

The drop in oil help the market shake off news of a hotter-than-expected inflation report.

US consumer prices jumped 1.1 per cent in June to an annual pace of 5.0 per cent. The monthly advance in the Labour Department's consumer price index (CPI) was the sharpest since June 1982, while a 0.3 per cent rise in core CPI excluding energy and food was the strongest since January.

Mr Dickson said a move by the Securities and Exchange Commission to limit certain types of 'short sales' in financial shares that aim to profit from a market decline also helped the market.

The action 'should eliminate some of the huge market volatility in these issues, thus restore some stability to the overall market,' he said.

Meanwhile Federal Reserve chairman Mr Ben Bernanke said Fannie Mae and Freddie Mac are 'in no danger of failing,' helping fuel a big boost in the troubled finance sector as fears of a deeper crisis ease.

Mr Bernanke's comments in Congress coincided with a sharp rebound in shares of the beleaguered mortgage-finance titans and a snapback in the banking sector as fears faded about a meltdown in the global financial system.

Fannie Mae leapt 31 per cent to US$9.25 and Freddie Mac climbed 29.8 per cent to 6.83.

Wells Fargo closed up 32.8 per cent at 27.23 as its earnings report surprised the market.

Among other key stocks, Johnson & Johnson rose 0.72 per cent to US$68.19 dollars as the health-care giant reported a quarterly profit of US$3.3 billion.

Intel added 0.97 per cent to US$20.91 after the world's biggest computer-chip maker reported a 25 per cent rise in quarterly earnings.

Bonds fell. The yield on the 10-year US Treasury bond rose to 3.934 per cent from 3.844 per cent on Tuesday while that on the 30-year bond increased to 4.582 per cent against 4.474 per cent. Bond yields and prices move in opposite directions. -- AFP