Stocks jump on renewed optimism on housing, banks
Wall Street rises as Lowe's profit beats forecast, analysts
issue upbeat bank comments Sara Lepro and Madlen Read, AP Business WritersOn
Monday May 18, 2009, 5:41 pm EDT
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Bank of America Corporation, Beazer Homes USA Inc., Lennar Corp.
NEW YORK (AP) -- Reassuring news about housing and banking on Monday
convinced investors to return to the stock market.
Related
QuotesSymbolPriceChangeBAC11.73+1.06BZH2.81+0.47LEN10.02+1.21LOW19.94+1.49STT41.79+3.28{"s"
: "bac,bzh,len,low,stt","k" : "c10,l10,p20,t10","o" : "","j" : ""}
The Dow Jones industrial average shot up 235 points, making up
three-quarters of last week's losses. All the major indexes rose about
3 percent.A better-than-expected profit report from Lowe's Cos.,
an uptick in homebuilder sentiment and positive comments from analysts
about U.S. banks revived investors' confidence in an economic rebound.
Stocks fell sharply last week on worries that a recovery might be
further off than hoped, interrupting a rally that has left the Standard
& Poor's 500 index up 34.5 percent since March 9.Steep drops
in home values have been at the heart of the economy's troubles,
slicing into consumers' wealth and saddling banks with huge losses.
Analysts believe that stability in the housing and banking industries
are imperative for the economy to rebound."There's a realization
that things are going to get better," said James Cox, managing partner
at Harris Financial Group. "That's the main theme of the market over
the last couple of weeks."Despite Monday's bounce, however, the
market is expected to remain volatile as investors look for signs that
the economy is actually recovering -- not just slowing its descent.At
the start of the market's upswing in March, signs of stabilization were
enough to encourage investors to buy stocks. Linda Duessel, equity
market strategist at Federated Investors, said the rally has been
driven by "less bad" information."Probably, we'll get bored with that as the
months progress," Duessel said. "We'll need something better to move the
market."The Dow rose 235.44, or 2.9 percent, to 8,504.08. That was the biggest
point gain since a 246-point jump on April 9.The
S&P 500 index rose 26.83, or 3 percent, to 909.71, putting it back
into positive territory for the year. The Nasdaq composite index rose
52.22, or 3.1 percent, to 1,732.36.Government bond prices fell,
pushing the yield on the 10-year Treasury note -- a widely used
benchmark for home mortgages and other loans -- up to 3.24 percent from
3.14 percent late Friday.Last week, the Dow slid 3.6 percent,
the S&P 500 index lost 5 percent and the Nasdaq fell 3.4 percent as
a weak retail sales report and an uptick in job losses had investors
questioning the merits of a two-month rally off of 12-year lows.But
U.S. and European trading started on strong footing Monday after
India's stock market rose an unprecedented 17 percent. Investors viewed
the country's election results as paving the way for economic reforms.U.S.
stocks got a boost when Lowe's Cos., the nation's second-largest home
improvement chain, posted earnings that easily beat Wall Street's
forecasts and raised its full-year profit outlook.Lowe's closed up $1.49, or
8.1 percent, at $19.94.Buying
accelerated later in the day when the National Association of Home
Builders said its housing market index rose for the second month in a
row in May. The report reflected growing optimism among builders, an
encouraging sign that housing activity might be picking up.Homebuilding
stocks soared on the news. Beazer Homes USA Inc. rose 47 cents, or 20
percent, to $2.81, while Lennar Corp. rose $1.21, or 13.7 percent, to
$10.02.Financial stocks also surged after a spate of analysts issued promising
outlooks for the troubled banking industry.Rochdale
Securities analyst Richard Bove noted the potential for "explosive
earnings growth and unusually strong stock price performance" for banks
as the economy recovers. Goldman Sachs raised its rating on Bank of
America Corp. to "Buy" on expectations for solid earnings in the second
quarter. And BMO Capital Markets upgraded its view of the banking
industry, anticipating that profits will start to rebound in coming
quarters.Bank of America rose $1.06, or 9.9 percent, to $11.73.State
Street Corp. was another big gainer after it became the latest bank to
turn to the capital markets to raise money. The commercial bank said it
expects to raise about $1.45 billion through a stock offering as part
of an effort to repay a $2 billion government loan that came as part of
the financial rescue program last fall.State Street rose $3.28, or 8.5 percent,
to $41.79.Analysts
say the ability of banks to raise cash is a welcome sign of strength,
even if the introduction of added shares makes those already in
circulation worth somewhat less."The banks are stable," Cox
said. "We're not going to see any of the large banks go down. And now
that we have stabilization in the banking system, we can move forward."In other
trading, the Russell 2000 index of smaller companies rose 18.95, or 4 percent,
to 494.79.About
nine stocks rose for every one that fell on the New York Stock
Exchange, where consolidated volume came to 5.5 billion shares, up from
5.3 billion shares Friday.Energy stocks were lifted by a sharp
gain in oil prices. Crude rose $2.69 to $59.03 a barrel as investors
made bets that demand would be strong throughout the summer driving
season, which kicks off this weekend with the Memorial Day holiday.The dollar
fell against other major currencies. Gold prices also fell.Stocks
overseas were mixed following weak corporate earnings reports in Asia.
Japan's Nikkei stock average fell 2.4 percent. Britain's FTSE 100
jumped 2.3 percent, Germany's DAX index rose 2.4 percent, and France's
CAC-40 rose 2.4 percent.
