I received a handful of phone calls on this one today from both family and candidates. It is certainly a relief to hear some good news amidst all the dismal news we have heard over the past many months! Fingers crossed things start to lok up for everyone!
Wall Street resumes rally following housing report
Investors restarted Wall Street's rally Tuesday, buying financial and homebuilder stocks following a surprisingly upbeat report on home construction.
Major market indicators jumped more than 2 percent, including the Dow Jones industrial average, which added 179 points. The technology-heavy Nasdaq surged more than 4 percent after sliding Monday. Stocks have risen five out of the past six sessions.
The government's report that housing starts rose unexpectedly in February more than offset news that Alcoa Inc. is slashing its dividend.
The upbeat construction report provided the latest glimmer of hope for Wall Street and revived interest in the long-suffering housing industry. Stocks began rallying a week ago after Citigroup Inc. said it operated at a profit in the first two months of the year.
Similarly upbeat assessments from other troubled banks and better-than-expected readings on retail sales have led some investors to believe the market has been too pessimistic about the economy.
Stocks surged last week in a four-session rally that left market barometers up about 10 percent — the type of gains they might normally take a year to assemble. Buyers stepped in again Tuesday after stocks posted moderate declines on Monday.
Brett D'Arcy, chief investment officer at CBIZ Wealth Management, said relatively quiet trading the past two days is "a great sign" because it means investors are holding on to gains from week and aren't trying to grab quick profits. He said that indicates a base could be forming in the market. A week ago the Dow jumped 379 points in one session.
According to preliminary calculations, the Dow rose 178.73, or 2.5 percent, to 7,395.70.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 24.23, or 3.2 percent, to 778.12, while the Nasdaq composite index rose 58.09, or 4.1 percent, to 1,462.11. The Russell 2000 index of smaller companies rose 17.23, or 4.5 percent, to 403.59. Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to a light 1.49 billion shares. Light volume indicates less conviction behind the market's moves.
D'Arcy said technology companies got an extra boost as investors moved back into those stocks after they fell sharply Monday.
The market has established a clear shift in tone over the past week. Jittery traders had blown apart earlier rallies this year by selling just as stocks managed to advance. A 20 percent run-up from late November until the start of the year fizzled as worries grew about the tattered balance sheets at large banks and signs that consumers will pulling back on their spending.
Renewed signs of balance in the economy since then have led investors to become more comfortable owning shares again.
Analysts caution that risks remain but investors embraced the data on home construction that came in well ahead of what economists had been expecting. Building permit applications, a key measure of future activity, also rose unexpectedly.
Tim Courtney, the chief investment officer at Burns Advisory Group, said the report was encouraging and could be part of an initial recovery in the housing market.
"We could be in the very early stages of some kind of normalization" in housing, he said. Many analysts say home prices have to stabilize before worried consumers will begin to increase their spending and the economy will begin to pick up speed.
In a rare burst of enthusiasm for anything related to the housing market, traders snapped up homebuilder stocks following the report. Pulte Homes Inc. rose 64 cents, or 6.7 percent, to $10.16, while Lennar Corp. jumped 68 cents, or 8.7 percent, to $8.52. Toll Brothers Inc. advanced 95 cents, or 5.9 percent, to $17.06.
Stocks of home supply retailers like Home Depot Inc. and Lowes Cos. rose more than 6 percent.
Traders looked past much of the day's bad news and also awaited the outcome of a two-day meeting of the Federal Reserve's interest rate committee that ends Wednesday. The central bank is widely expected to leave rates at their current historically low level, but the market will be keen to see how the Fed sizes up the economy in its statement that accompanies the decision on rates.
Craig Peckham, a market strategist at Jefferies & Co. Peckham, said he was encouraged that the decision by aluminum producer Alcoa to reduce its payout didn't send "shockwaves" through the market as he contends it would have just weeks ago.
Alcoa became the latest of the 30 companies that make up the Dow Jones industrial average to lower its dividend to conserve cash. The company said it was cutting its quarterly dividend 82 percent to 3 cents. It also said it plans to sell stock and debt to help reduce annual costs by more than $2.4 billion. Alcoa fell 53 cents, or 8.7 percent, to $5.59 and was one of only three stocks in the Dow to lose ground.
