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Stocks rise following rebound in home sales

February 04, 2009|Associated Press

NEW YORK — Stocks rose sharply Tuesday on heartening home sales data and some better-than-expected corporate earnings, sending major stock indexes up more than 1%.

The Dow Jones industrials rose more than 140 points after losing almost 440 over the three preceding sessions.

The National Assn. of Realtors said buyers snapped up properties at steep discounts in December, especially in the South and Midwest, pushing the group's seasonally adjusted index of pending sales of existing homes up 6.3% from November's level.

"The market is encouraged by the more upbeat report on housing, albeit from a low level," said Alan Gayle, senior investment strategist at RidgeWorth Investments. "A key element of the current malaise is housing and credit-related. And the report on home sales suggests that we are making progress on that front."

Also helping lift the market were a number of corporate earnings reports.

Drug makers Merck and Schering-Plough released results that were better than analysts predicted, and builder D.R. Horton reported a loss that was narrower than forecast. UPS shares rose 6.1% on relief its results weren't worse.

Merck climbed 6.4%, Schering-Plough surged 8.2%, and D.R. Horton shot up 21%.

Not all the news on the earnings front was good.

Motorola posted a $3.6-billion loss and suspended its dividend. Analysts had expected it to break even. Its stock fell 11%.

Banking stocks slumped after PNC Financial Services Group said it swung to a loss in the fourth quarter on charges tied to its acquisition of National City. One of the country's largest bank companies, PNC also said it would cut 5,800 jobs. PNC's shares fell 7.2%.

Financial stocks in the Standard & Poor's 500 index slumped 2.5% on average, the only one of the index's 10 main industry groups to show a decline. Bank of America sank 12%, while regional bank SunTrust tumbled 16%.

The Dow Jones industrial average jumped 141.53 points, or 1.8%, to 8,078.36.

The S&P 500 rose 13.07 points, or 1.6%, to 838.51, and the Nasdaq composite index rose 21.87 points, or 1.5%, to 1,516.30.

The Russell 2,000 index of smaller companies rose 0.7%.

Losing stocks outnumbered gainers 3 to 2 on the New York Stock Exchange.

Investors also took comfort from comments by Treasury Secretary Timothy Geithner, who told the Wall Street Journal that the government needed to spend a lot to send a jolt through the economy.

Yields on Treasury bonds rose along with stocks. The benchmark 10-year Treasury note rose to 2.84% from 2.71% late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.32%, its highest level since December, from 0.26% on Monday.

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