Stock Market Surges On Surprisingly Positive Housing Market Data

Stocks surged Tuesday on signs of resilience in the housing market, with falling oil prices contributing to the rally. The Dow Jones industrials gained more than 120 points yesterday afternoon.

In mid-afternoon trading, the Dow rose by 125.40 points, or a surprising 1.01 percent, to 12,507.70. The index is now back in positive ground for the year, and about 280 points below its record February 20 close.

Broader stock indicators also soared thanks to the promising mortgage loan and housing market outlooks. The Standard & Poor’s 500 index gained 12.68, or 0.89 percent, to 1,437.23, and the Nasdaq composite index added 28.36, or 1.17 percent, to 2,450.62.

The National Association of Realtors’ index for pending sales of existing homes rose in February at a seasonally adjusted rate of 0.7 percent. The index is well below where it was a year ago, but stronger than investors had been expecting.

This reassured them that the housing sector, while noticeably weak, is not being pummeled by the struggling subprime (bad credit mortgage) sector.

Fears that America will see widespread mortgage problems spill over into the rest of the economy have been a major factor behind the market’s volatility of the past several weeks. The uptick in sales came as a pleasant surprise.

“That says people are getting home loans, people are buying houses, people have incomes, jobs, all that good stuff,” said Kim Caughey, equity research analyst at Fort Pitt Capital Group.

“You’d never go out and buy a house if you think you’re going to get laid off. Consumers are optimistic about the future, and as we all know, it’s consumer spending that drives this economy.”

In addition to filling out mortgage applications, consumers are apparently still buying cars, too, although sales reports issued Thursday showed that Toyota Motor Corp. again outperformed U.S. automakers last month.

Waning crude oil prices, declining as tensions eased between Britain and Iran, also encouraged investors. Energy prices also factor into inflation pressures, which can crimp consumer spending and are an obstacle to lower mortgage rates.

Bonds were lower after the home sales data, with the yield on the benchmark 10-year Treasury note at 4.67 percent, up from 4.65 percent late Monday. The dollar rose against other currencies, while gold was little changed.

U.S. home builders advanced after the rise in pending home sales.

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