Stocks Rise on Stronger US housing, Factory Data
A rare double shot of good news about the U.S. economy sent stocks strongly higher Tuesday. The Dow Jones industrial average rose 82 points despite lingering fear about Europe's debt turmoil.
Americans signed more contracts to buy previously occupied homes in May, matching the fastest pace in two years, the National Association of Realtors said. The report was the latest signal that the housing market is improving in many regions following a slump of more than six years.
Homebuilders soared. Lennar Corp. had reported earlier that its second-quarter profit rose as deliveries and new orders increased. Its stock jumped $1.80, or 7 percent, to $29.19, the biggest gain in the Standard & Poor's 500 index.
The ISE Homebuilders index rose 42 cents, or 4 percent, to $10.69. PulteGroup, D.R. Horton and Hovnanian Enterprises all rose sharply.
Earlier, the government said that businesses placed more orders for long-lasting manufactured goods in May, suggesting that their confidence in the U.S. economy was not shaken by signs of weakness that emerged this spring. Core goods, a measure of business investment plans, also jumped.
The reports offered a rare glimpse of good news about the U.S. economy, which continues to recover slowly despite three months of weak output and abysmal job growth. They "were really quite good," said Dennis Gartman, an economist and editor of The Gartman Letter, a source of daily market commentary.
"The economy is doing reasonably well and will continue to muddle on through," Gartman said.
The Dow rose 82 points to 12,617 as of noon Eastern. Coca-Cola rose $1.10 to $76.18 after the company said it would invest another $3 billion in India's rapidly growing consumer market over the next eight years.
The S&P 500 rose 10 points to 1,329. Its biggest loser by far was auto parts maker O'Reilly Automotive, which fell $17.60, or 19 percent, to $78.84. O'Reilly said its second-quarter earnings will be at the low end of its earlier estimates and sales will be weaker than previously expected.
H&R Block leapt 40 cents, or 3 percent, to $15.49. The tax preparer company posted a lower fourth-quarter profit than analyst had expected, but the company gained valuable market share while cutting jobs and closing stores to focus on electronic tax filing.
The Nasdaq composite average rose 22 points to 2,876.
Markets remain wracked with concern about Europe as leaders there prepare for a two-day summit aimed at defusing their lingering debt crisis. German Chancellor Angela Merkel warned Wednesday that there would be no quick solution to the structural issues plaguing the continent.
Europe will cause volatile stock trading in the coming weeks because the summit is unlikely to produce a lasting solution, Gartman said. He said the meeting is scheduled to be two days, but Italian Prime Minister Mario Monti promised to keep it going until Sunday if an agreement has not been reached.
"I think he can keep them there until Sunday five weeks from now and there's little chance they'll agree," Gartman said.