Stocks jump following rebound in home sales

[February 04, 2009]  NEW YORK (AP) -- Some heartening news on home sales and earnings Tuesday has let Wall Street set aside a little of its angst.

Major stock indexes jumped more than 1 percent Tuesday, and the Dow Jones industrials rose more than 140 points to snap a three-day slide as some of the day's data turned out to be more upbeat than expected. Still, analysts cautioned that the economy will keep showing fresh bruises in the coming months and that stock trading will remain volatile.

The National Association of Realtors said buyers stepped in to snap up properties at steep discounts in December, especially in the South and Midwest. Its seasonally adjusted index of pending sales for preowned homes rose 6.3 percent in the final month of the year from revised figures in November. Wall Street welcomed the news; investors are looking for any signs that the housing industry slide is slowing.

"The market is encouraged by the more upbeat report on housing, albeit from a low level," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "A key element of the current malaise is housing and credit-related. And the report on home sales suggests that we are making progress on that front."

Stocks also rose on the strength of some corporate earnings. Drugmakers Merck & Co. and Schering-Plough Corp. helped lift the market after their quarterly numbers came in better than expected. Homebuilder D.R. Horton Inc. reported a loss for its latest quarter that was narrower than analysts expected. And shipper UPS Inc. rose on relief its quarterly results weren't worse.

Investors still worried about some reports. Mobile phone maker Motorola Inc. said it lost $3.6 billion last quarter and suspended its dividend.

And financial stocks lagged the broader market after one of the nation's largest banks posted disappointing results. PNC Financial Services Group Inc. said it swung to a loss during the fourth quarter because of charges tied to its recent acquisition of National City Corp. The Pittsburgh-based bank also said it would cut 5,800 jobs following the purchase. PNC shares fell 7.2 percent.

Jim McDonald, director of equity research at Northern Trust, said the day's rally on light volume and in defensive areas like health care and weakness in financials means the market is simply papering over the economy's troubles, not building a base for moving higher.

"What we're seeing in the market today is not the fuel for a sustained rally," he said. "It's too early right now to start to believe that we're going to see evidence of stability in the economic data."

The Dow Jones industrial average rose 141.53, or 1.78 percent, to 8,078.36.

Broader stock indicators also rose. The Standard & Poor's 500 index rose 13.07, or 1.58 percent, to 838.51, and the Nasdaq composite index rose 21.87, or 1.46 percent, to 1,516.30.

The Dow and the S&P 500 had fallen for the past three sessions.

The Russell 2000 index of smaller companies rose 3.29, or 0.73 percent, to 452.90.

Losing stocks outnumbered gainers by 3 to 2 on the New York Stock Exchange, where consolidated volume came to 5.13 billion shares, compared with 4.94 billion traded Monday.

Stocks ended mixed Monday, with the Dow and S&P lower and the Nasdaq higher. The indexes have fallen for four straight weeks on growing worries about the economy. The Dow and S&P each suffered their worst January ever -- dropping more than 8 percent for the month.

Bond prices fell Tuesday. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.88 percent from 2.72 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.32 percent from 0.26 percent late Monday. The three-month yield is at its highest level since December.

Gayle said investors are pleased to see the rise in the three-month yield because it suggests some fear is evaporating from the market. Since last fall, investors have been pushing into T-bills looking for safety. They were willing to accept even the most modest of yields in return for protection of their money. Falling demand for T-bills suggests investors might be willing to take on more risk in areas like corporate debt and stocks.

"Investors are gradually putting money to work out there," Gayle said. "We're encouraged that although the economy has been beaten down very badly, that there are some signs of improvement."

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose 70 cents to settle at $40.78 a barrel on the New York Mercantile Exchange.

Investors also took comfort Tuesday from comments from Treasury Secretary Timothy Geithner. He told The Wall Street Journal the U.S. should be ready to spend a lot to send a jolt through the U.S. economy. Otherwise, he said, the U.S. could risk a similar nagging recession like that that has dogged Japan since the 1990s.

Companies reporting results were mixed. Merck rose $1.81, or 6.4 percent, to $30.24, while Schering Plough rose $1.44, or 8.2 percent, to $18.91. D.R. Horton jumped $1.31, or 21 percent, to $7.42, and UPS rose $2.58, or 6.1 percent, to $45.

Motorola fell 50 cents, or 11 percent, to $4.04.

Among financials, PNC Financial fell $2.33, or 7.2 percent, to $29.85. Bank of America Corp. fell 70 cents, or 12 percent, to $5.30.

Regional banks saw some of the biggest selling. SunTrust Banks Inc. fell $1.93, or 16 percent, to $10.02, while Fifth Third Bancorp fell 30 cents, or 14 percent, to $1.79.

Overseas, Britain's FTSE 100 rose 2.13 percent, Germany's DAX index rose 2.43 percent, and France's CAC-40 rose 1.79 percent. Japan's Nikkei stock average fell 0.62 percent.

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On the Net:

New York Stock Exchange: http://www.nyse.com/

Nasdaq Stock Market: http://www.nasdaq.com/

[Associated Press; By TIM PARADIS]

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