New York: US stocks snapped a three-day losing streak on Monday as stronger-than-expected home sales data fueled optimism while a weaker dollar boosted commodity-linked stocks.
Sales of previously owned US homes rose to their highest level in more than 2-1/2 years last month. That helped to ease concerns about the sector generated last week when another report showed housing starts fell sharply in October.
Monday’s data went some distance to reassure investors who have pared positions as they fret about the economy. Stocks rallied broadly, with all 10 S&P sectors showing strong gains.
The Dow industrials reached a new 13-month high but volume was light, which some investors read as a lack of conviction.
“We had one bad (housing) start number and people were so willing to talk about a double-dip (recession),” said Jim Paulsen, chief investment officer at Wells Capital Management. “The great bulk of the evidence says there’s definitely been a recovery going on in housing, and today certainly adds to that.”
The Dow Jones industrial average gained 132.79 points, or 1.29%, to end at 10,450.95. The Standard & Poor’s 500 Index rose 14.86 points, or 1.36%, to 1,106.24. The Nasdaq Composite Index added 29.97 points, or 1.40%, to close at 2,176.01.
US stocks have moved erratically, often in low volume, in recent weeks.
“If you’re bearish, there’s a piece of data every couple of weeks that you can lash onto, and if you’re optimistic, you’ll find something to be encouraged about,” said Robert Stimpson, portfolio manager at Oak Associates in Akron, Ohio
Among home builders, D.R. Horton rose 2.8% to $10.66 and MDC Holdings Inc gained 1.1% to $30.92 after the National Association of Realtors said existing home sales jumped 10.1% in October.
The US dollar fell 0.7% against major currencies after St. Louis Federal Reserve President James Bullard said on Sunday that the Fed should extend its mortgage-related assets purchase program.
The comments fueled expectations that interest rates would remain low for an extended period.
The slide in the dollar helped lift commodity stocks as gold hit a record $1,170.55 an ounce and copper rose to levels not seen for 14 months, helped also by expectations of recovery.
Newmont Mining Corp rose 2.1% to $53.34. The Dow Jones US industrial metals and mining index added 0.8%.
A weaker dollar increases dollar-denominated commodity prices as local manufacturers demand more dollars for their products, and it helps boost US export earnings.
News that US President Barack Obama’s healthcare reform plan cleared an important Senate vote over the weekend helped push The Morgan Stanley Healthcare Payor index up 3.6%. The AMEX Pharmaceutical index rose 1.2%.
On the downside, Ciena Corp shed 8.9% to $12 after it agreed to buy the optical networking and ethernet equipment businesses of bankrupt Nortel Networks
On the New York Stock Exchange, volume was anemic, with only about 980 million shares changing hands, well below last year’s estimated daily average of 1.49 billion.
On the Nasdaq, volume was light, with about 1.86 billion shares traded, below last year’s daily average of 2.28 billion.
Advancing stocks outnumbered decliners on the NYSE by a ratio of more than 3 to 1. On the Nasdaq, more than two stocks rose for every one that fell.