Better-than-expected pending home sales data give Wall Street a boost, extending the recent run.
Stocks rallied Monday afternoon as a better-than-expected housing market report added to bets that the economy is closer to stabilizing, enabling Wall Street to extend the recent advance.
The Dow Jones industrial average (INDU) gained 156 points, or 1.9%, with under 3 hours left in the session. The S&P 500 (SPX) index added 17 points, or 2%. The Nasdaq composite (COMP) rose 25 points, or 1.5%.
Stocks are coming off a strong April, in which the S&P 500 spiked 9.4%, the Dow gained 7.3% and the Nasdaq jumped 12.3%. The S&P 500 and Dow have gained for seven of the past eight weeks; the Nasdaq has jumped eight weeks in a row.
Stocks have been surging on bets that the worst for the economy is over. Those bets were furthered Monday by the day's economic reports.
The March pending home sales index from the National Association of Realtors jumped 3.2% from February, surprising economists who were looking for the index to hold steady.
"If you subscribe to the theory that the global economic crisis started with the U.S. housing market and will end there, you're going to be encouraged by reports like this that suggest housing is bottoming," said Kevin D. Mahn, managing director at Hennion & Walsh.
Another report, from the government, showed construction spending rose 0.3% versus forecasts for a decline of 1.6%. Spending fell 1% in February.
Mahn said investors were also responding well to weekend comments from Berkshire Hathaway (BRK.A) leader Warren Buffett, who said he sees the recession ending soon and predicts that no big bank will fail. He also talked up Wells Fargo, one of Berkshire's largest holdings.
Speaking at the company's annual meeting, Buffett also said Berkshire will post a first-quarter operating profit.
Banks: Financial shares are likely to be choppy ahead of the release of the government's "stress tests" on Thursday. The government will release details on the 19 individual companies tested as well as the broad group of corporations.
The results are expected to include estimated loan losses in the event that the economy deteriorates further, along with an estimate of how much more capital banks would need to raise in such an environment.
Citigroup (C, Fortune 500) is reportedly among the banks that will need to generate more money to stay afloat. The bank may have to raise another $10 billion, according to the Wall Street Journal.
Bank of America (BAC, Fortune 500) shot down reports in the Financial Times that it has been told by the government that it needs to raise $10 billion in fresh capital.
Wells Fargo has reportedly been asked to raise additional money as the result of preliminary stress tests.
However, shares of the three companies rallied, along with the rest of the bank sector, as investors took the news in stride. The KBW Bank (BKX) sector index gained nearly 6%.
Corporate news: Sprint Nextel (S, Fortune 500) reported a quarterly profit, excluding items, surprising analysts who were looking for a quarterly loss. Shares gained 12%.
Gains were broad based with 28 of 30 Dow stocks rising, led by Chevron (CVX, Fortune 500), Exxon Mobil (XOM, Fortune 500), IBM (IBM, Fortune 500) and Johnson & Johnson (JNJ, Fortune 500).
Market breadth was positive. On the New York Stock Exchange, winners topped losers four to one on volume of 680 million shares. On the Nasdaq, advancers topped decliners nine to four on volume of 1.29 billion shares.
Bonds: Treasury prices slipped, raising the yield on the benchmark 10-year note to 3.16% from 3.15% Friday. Treasury prices and yields move in opposite directions.
Other markets: In global trading, Asian markets ended higher and European markets mostly ended higher.
In currency trading, the dollar fell versus the euro and the yen.
U.S. light crude oil for June delivery rose 52 cents to $53.72 a barrel on the New York Mercantile Exchange.
COMEX gold for June delivery rose $17.80 to $906 an ounce.
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