Stocks rose about 1 percent on Tuesday as a strong quarterly report from IBM and a surge in housing starts sparked investor optimism a day after a selloff.

Bank stocks were pressured after Goldman Sachs Group Inc fell following its results, though Bank of America , which also issued its quarterly report, advanced.

Dow component International Business Machines Corp added 3.2 percent to $180.80 a day after it said new business at its services division was up more than expected, raising hopes for the technology sector this year. The S&P information technology sector <.GSPT> gained 1.8 percent, the top gainer among S&P sectors. For details, see

Housing starts topped forecasts in June to touch a six-month high, and permits for future construction unexpectedly increased, the government reported. Homebuilder D.R. Horton Inc climbed 3.6 percent to $11.90.

So far earnings have been showing us a better picture of the economy than some macroeconomic issues suggest, which is encouraging, especially with housing starts surprising to the upside, said Michelle Gibley, senior market analyst at Schwab Center for Financial Research in Denver.

The Dow Jones industrial average <.DJI> jumped 115.76 points, or 0.93 percent, at 12,500.92. The Standard & Poor's 500 Index <.SPX> was up 12.17 points, or 0.93 percent, at 1,317.61. The Nasdaq Composite Index <.IXIC> put on 37.82 points, or 1.37 percent, at 2,802.93.

Goldman's second-quarter net income fell short of lowered expectations as fixed income trading revenue dropped sharply. Bank of America recorded a second-quarter net loss of $8.8 billion after a big settlement with mortgage bond investors.

Goldman fell 1.7 percent to $127.08, while Bank of America fell 2.4 percent to $9.50.

Goldman is obviously disappointing, Gibley said. They're seen as an industry leader and are expected to print better numbers than this.

Coca-Cola Co posted slightly better-than-expected profit on strength in emerging markets. Johnson & Johnson's earnings topped estimates on a turnaround in its prescription medicines and stabilizing sales of over-the-counter medicines.

Coke rose 2.2 percent to $68.62, while J&J was 1.1 percent lower at $66.36. Both stocks are Dow components.

The latest reports followed strong reports from JPMorgan Chase & Co and Google Inc last week, though they were largely overshadowed by concerns over government debt problems in the United States and Europe that gave the S&P its worst week in five and contributed to a decline on Monday.

Two weeks before a final deadline, U.S. President Barack Obama and top lawmakers faced more pressure for a deal to raise the debt ceiling amid a growing sense that a last-ditch plan taking shape in Congress may be the only way to avoid a U.S. default.

(Editing by Jeffrey Benkoe)

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