Stocks Climb After Home-Sales Surprise
Stocks advanced Wednesday after a pair of better-than-expected economic numbers. New-home slaes rose more than expected and durable-goods orders unexpectedly rose, snapping a six-month slide.
The gains were a welcome reprieve after Tuesday's flop, which sent major indexes down more than 1 percent.
New-home sales rose 4.7 percentto a 337,000 annual rate in February, much higher than the 300,000 expected. However, the median home price fell by a record 18.1 percent to $200,900 from a year ago.
"Sales remain incredibly weak but, as with the existing sales numbers, we are prepared to hazard the view that the post-Lehman meltdown is now over and the market is stabilizing," Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a note to clients. "That's not the same as a recovery, but it is better than continued declines in sales."
Durable-goods orders jumped 3.4 percentto $165.6 billion in February, an unexpected move, after six straight months of decline. Economists had expected that streak to continue with a 2.2-percent drop. Excluding the volatile transportation component, orders rose 3.9 percent, the largest gain since August 2005.
And mortgage applications surged 32.2 percentlast week, buoyed by a drop in mortgage rates and a flock of refinancing moves, which made up 78.5 percent of the gain.
Some investors were also encouraged by comments from President Obama, delivered in a prime-time address last night, that he was seeing signs of progressin his drive to lead the U.S. out of the recession. He also said the Federal Reserve is preparing to start buying Treasurys to boost the money supply.
But the measure is far from spurring the enthusiasm it did when it was first announced.
"I am a bit concerned on spending… this is one of the things that's going to lead to a weaker dollar down the road," Jared Levy from Financial Markets Education told CNBC.
"Longer term I don't feel that comfortable with it. I feel at this point the government is throwing everything against the wall and hopes that something sticks," Levy told CNBC.
At the same time, the administration ran into more trouble in its efforts to institute the bailout plan as hedge fund manager Frank Brosens, a big Democratic donor expected to run the bank bailout, withdrew his name from nomination.
Citigroup shares rose. The bank's decision to do a reverse stock split may be enough to quell calls for the bank's removal from the Dow, John Prestbo, the chairman of the Dow Jones Index oversight committee, said yesterday.
Other banks also advanced, including Dow components Bank of America and JPMorgan .
Ford shares rose following news that its in serious talks with potential buyers to sell its Volvo unit.
Chip stocks rallied after Citigroup raised its price target on several companies in the sector, citing the "general improvement in semiconductor conditions since the Chinese New Year." Citi raised its targets on Cypress Seminconductor , Intel and Micron Technology .
Late Tuesday, Standard & Poor's revised its outlook on investor Warren Buffett's Berkshire Hathaway, cutting its Berkshire Hathaway Finance unit to negative from stable, because declines in shares values in 2009 meant the group's capital may no longer be adequate for its triple-A rating.
With each new rally, investors want to know: Is it for real this time?
DA Davidson said if the S&P breaks above 866, it would "signal to us a major trend reversal and most likely the formal end of the current bear market."
Until then, however, it's just a "significant bear market rally," the analysts wrote in a note to clients.
Still to Come:
WEDNESDAY: New-home sales; weekly crude inventories; Fed's Pianalto and Yellen speak
THURSDAY: Final GDP; Weekly jobless claims; new-home sales; earnings from Best Buy, GameStop; Geithner to unveil plan for overhauling the financial system; Fed's Lockhart, Fisher, Lacker and Stern speak
FRIDAY: Personal income/spending; Consumer confidence
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