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Stocks rally as oil surges to a 2016 high; profit season looms


Stocks jumped and oil prices rallied to a new high for the year Tuesday even as Wall Street investors are expecting a weak first-quarter earnings season that kick offs this week.

The unofficial start to the profit reporting season kicked off after Monday's closing bell with a disappointing report from aluminum maker Alcoa (AA), which topped lowered earnings expectations despite a more than 90% drop in earnings but fell short on revenues.

The Dow Jones industrial average ended up about 165 points, or 0.9%. The broader Standard & Poor's 500 stock index gained 1% and the technology-packed Nasdaq composite rose 0.8%.

Energy shares led the gains as U.S. benchmark crude jumped 4% to $42.00 a barrel.

Energy-related exchange traded funds are surging on renewed hopes of oil production cut at this weekend’s meeting of major oil producers. Vanguard’s Energy ETF (VDE) is up 3.2% today and IShares U.S. Energy ETF (IYE) is nearly 3% higher. The SPDR S&P Oil and Gas Exploration and Production ETF is nearly 6% higher.

More than a dozen companies in the S&P 500 are scheduled to release first-quarter profit results this week. The next key earnings reports come Wednesday when big banks JPMorgan Chase and Bank of America release results. Wells Fargo reports Thursday and Citigroup releases results Friday.

Expectations are low heading into the first-quarter earnings season, as profits in the S&P 500 are expected to contract more than 7%, according to Thomson Reuters I/B/E/S. If earnings growth finishes negative when all 500 companies report, it will mark a third straight quarter of shrinking earnings, which amounts to a so-called "earnings recession."

Wall Street pros are mixed on whether companies will be able to easily top the lowered expectations, or whether the earnings season will spark a more bearish, or negative reaction, overall.

Stocks around the globe also traded cautiously Tuesday. In Europe, the broad Stoxx Europe 600 was 0.1% higher, Germany's DAX index was up 0.3% and the CAC 40 in France was up 0.1%.

Shares were mixed in Asia. A weaker yen helped Japanese shares in the Nikkei 225 rise 1.1%. In Hong Kong, the Hang Seng index finished up 0.3% and mainland China's Shanghai composite dipped 0.3%.

Adam Shell on Twitter: @adamshell.