An explosive start to the bank reporting season propelled US equities to their highest close for five years on Tuesday.

Goldman Sachs, the world’s second biggest securities company, jumped 6.2 per cent to $149.42 after delivering an expectation-beating 64 per cent jump in first quarter net income, helped by record trading and money management fees.

The stellar results helped buoy the rest of the sector, with Lehman Brothers and Bear Stearns – both due to report their earnings later this week – rising 2.2 per cent to $145.30 and 2.6 per cent to $134.53 respectively.

“Good news from the well-watched financial area and a bounce in semiconductor stocks are giving the market short-term technical strength,” said Christopher Johnson, director of quantitative analysis at Schaeffer’s investment research.

A drop in the 10-year Treasury note yield also helped underpin equities, with fading concerns over interest rates helping to offset news of weak US retail sales and a ballooning US current account deficit .

The Dow Jones Industrial Average rose 0.7 per cent to 11,151.34 – its highest close since June 2001 – while the broader S&P 500 gained 1 per cent to 1,297.48, finishing at its highest level since May 2001. The Nasdaq Composite climbed 1.3 per cent to 2,295.90.

Shares of housebuilders shot up after Credit Suisse lifted its rating on DR Horton and M/I Homes, citing attractive valuation.

DR Horton was the top gainer on the S&P 500, jumping 6.8 per cent to $33.68, while M/I Homes gained 10.2 per cent to $44.15.

Elsewhere, Dow component Procter & Gamble lost 3.2 per cent to $60.01 after saying that it expected organic sales growth to come in at the lower end of previous forecasts.

The consumer goods giant said the revised predictions reflected recent customer inventory reductions and a reduced outlook for Asia and eastern Europe.

The Dow found support instead from industrial blue chips, which advanced on the backs of the lower bond yields. 3M gained 2 per cent to $73.53 and Honeywell rose 1.6 per cent to $42.35.

Anheuser-Busch, the world’s biggest brewer, climbed 1.7 per cent to $43.33 after several analysts upgraded the stock.

Deutsche Bank raised its rating from “hold” to “buy”, saying the stock was undervalued.

“After 18 months of share price decline, industry volume slump and price warfare, the sentiment on the stock now appears overly pessimistic,” said analyst Marc Greenberg. “Anheuser-Busch deserves a very good look at current levels.”

An upgrade from Merrill Lynch sent shares in US Steel 4 per cent higher to $57.68. US Steel was not the only one to benefit from soaring metal prices.

Phelps Dodge, the copper producer, was raised from “in-line” to “outperform” by Goldman Sachs, who said the company stood to benefit from strong demand for the metal. Its shares rose 6 per cent to $71.46