Stock indexes gain with oil; biotech shares rebound

By Caroline Valetkevitch

NEW YORK (Reuters) - World stock indexes edged higher on Wednesday with a rebound in biotech shares boosting U.S. equities and as oil prices resumed an upward move in volatile trading.

U.S. stocks rose modestly, but concern about corporate earnings just ahead of the third-quarter reporting season kept a lid on optimism. Reduced profit forecasts from Adobe (ADBE.O) and Yum Brands (YUM.N) added to gloom about the earnings picture.

Oil prices struggled to extend their recent rally as U.S. government data showed domestic crude inventories rose 3.1 million barrels last week, more than forecast.

The U.S. dollar rose against the euro and the Swiss franc, while the yen gained against the dollar after the Bank of Japan left monetary policy unchanged. The dollar index (.DXY) was up 0.1 percent.

Although the Bank of Japan held off on expanding stimulus on Wednesday, expectations of more support rather than less are growing as worries mount over a global economic slowdown. This week, the International Monetary Fund again cut its growth forecast.

The potential for more stimulus from the European Central Bank and Bank of Japan has contributed to a backdrop of accommodative central bank policy, along with expectations that a Federal Reserve rate increase will remain on hold until 2016.

On Wall Street, the S&P 500 health care index (.SPXHC) was up 1.3 percent, in the biggest boost to the S&P 500, while the Nasdaq Biotech index (.NBI) was up 1.9 percent, after recent steep losses.

The Dow Jones industrial average (.DJI) rose 69.95 points, or 0.42 percent, to 16,860.14, the S&P 500 (.SPX) gained 10.06 points, or 0.51 percent, to 1,989.98 and the Nasdaq Composite (.IXIC) added 25.29 points, or 0.53 percent, to 4,773.65.

Shares of Adobe were down 6 percent at $80.05.

"Tech investors are very worried heading into earnings season and this has been an overhang with many of the tech stalwarts having a bullseye on their back," said Daniel Ives, senior analyst at FBR Capital.

Analysts have been cutting forecasts for U.S. third-quarter earnings since the start of the quarter.

But even as Citi strategists have warned that analyst earnings forecasts are too optimistic, they have backed the view that the bull market has yet to die, predicting global equities will rise 20 percent through to the end of 2016. The market is "already pricing in" a gloomier scenario, they argue.

The pan-European FTSEurofirst 300 (.FTEU3) closed up 0.1 percent, while MSCI's all-country world stock index was up 0.8 percent.

Asian shares reached a seven-week high. South Korea's Samsung Electronics helped sentiment when it reported an estimated quarterly profit that exceeded analyst expectations.

Brent (LCOc1,) the global crude benchmark, was up 25 cents at $52.17 a barrel by 12:22 p.m. (1622 GMT). At its session high, Brent was up more than $1. It turned negative before then edging higher.

The West Texas Intermediate (WTI) benchmark for U.S. crude (CLc1) was down 5 cents to $48.48 a barrel. It had also been up more than $1 at its session high.

U.S. Treasuries prices fell. Benchmark 10-year Treasuries were down 10/32 in price to yield 2.072 percent, up almost 4 basis points from late Tuesday.

(Additional reporting by Tanya Agrawal, Sam Forgione, Lionel Laurent, Anirban Nag and Lisa Barrington; Editing by Nick Zieminski and Leslie Adler)