Stocks surge on signs of housing resilience
NEW YORK » Stocks surged yesterday on signs of resilience in the housing market and the U.S. consumer, with falling oil prices giving investors an extra reason to rally.
The Dow Jones industrials gained more than 120 points to reach a five-week high.
The National Association of Realtors' index for pending sales of existing homes rose in February at a seasonally adjusted annual rate of 0.7 percent. The index is well below where it was a year ago but stronger than investors expected, reassuring them that the housing sector, while weak, is not being pummeled by the struggling subprime mortgage sector.
Fears that lending problems will spill over into the rest of the economy have been a major factor behind the market's volatility of the past several weeks. The uptick in home sales was slight but came as a pleasant surprise to investors who had been bracing for the worst.
"That says people are getting mortgages, people are buying houses, people have incomes, jobs, all that good stuff," said Kim Caughey, equity research analyst at Fort Pitt Capital Group. "You'd never go out and buy a house if you think you're going to get laid off. Consumers are optimistic about the future, and as we all know, the consumer drives this economy."
Other data yesterday also suggested the American consumer is strong: A report from Redbook Research showed consumers spent more at chain stores in March than they did in February, while Toyota Motor Corp. reported a steep increase in U.S. sales in March.
A decline in crude oil prices, waning as tensions eased between Britain and Iran, also encouraged investors. High energy prices contribute to inflation, which can crimp spending and hurt the chance of lower interest rates.
The Dow rose 128.00, or 1.03 percent, to 12,510.30 -- its highest close since Feb. 26, the day before it made its 416-point plunge. The blue chip index is back in positive territory for the year, and 276 points below its record close of 12,786.64, reached Feb. 20.
Broader stock indicators also soared. The Standard & Poor's 500 index gained 13.22, or 0.93 percent, to 1,437.77, and the Nasdaq composite index added 28.07, or 1.16 percent, to 2,450.33.
The Russell 2000 index of smaller companies rose 8.55, or 1.06 percent, to 811.77.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to 2.90 billion shares, up from 2.80 billion shares Monday.
Bonds were lower after the home sales data, with the yield on the benchmark 10-year Treasury note at 4.67 percent, up from 4.65 percent late Monday. The dollar rose against other major currencies and gold prices slipped.
Light sweet crude dropped more than a dollar to $64.64 a barrel on the New York Mercantile Exchange.
Prices had surged when 15 British sailors and marines were detained March 23 by Iran, but the two nations are in negotiations that appeared to be bringing the captives closer to release.