By Stephen Bernard and Tim Paradis
Better news from the housing industry sent stocks higher Tuesday, including an increase in the number of people with contracts to buy homes.
The National Association of Realtors, a trade group, said its index of sale contracts rose 1 percent in December. It was the ninth improvement over the past 10 months as buyers scrambled to take advantage of a first-time homebuyer tax credit before it was set to expire last November.
"It's a slow, sustainable growth," said Daniel Penrod, senior industry analyst for the California Credit Union League. "Most people would prefer a quick rebound but that's not likely to happen."
The home sales report was the latest bit of encouraging news on the economy. Stocks rose on Monday after a surprisingly strong reading on the manufacturing sector, and on Friday the government reported that the US economy grew at an annual rate of 5.7 percent in the final three months of 2009, a faster pace than expected.
Homebuilder stocks rose sharply after D.R. Horton Inc. posted its first profit since 2007 during its fiscal first quarter. Much of its $US192 million profit during the October-December period came from a tax gain, but its revenue rose because of a 36 percent jump in home sales. Orders increased 45 percent.
The reports brought a positive tone to the market, which stumbled in late January as concerns arose that the recovery might be stalling and that the market's 10-month advance was running out of gas. The Standard & Poor's 500 index fell 3.7 percent in January, its worst month since hitting a 12-year low nearly a year ago.
In early afternoon trading, the Dow Jones industrial average rose 84.34, or 0.8 percent, to 10,269.87. The Standard & Poor's 500 index rose 10.60, or 1 percent, to 1,099.78, while Nasdaq composite index rose 12.82, or 0.6 percent, to 2,184.02.
Bond prices inched higher. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.65 percent from 3.66 percent late Monday.
Investors are turning their attention to a series of economic reports this week to see if the growth of late last year has a good chance of continuing. The most important indicator will come on Friday when the Labor Department releases its January employment report.
Among home builders, D.R. Horton jumped $US1.31 cents, or 11 percent, to $US13.22 after posting a profit for the first time since 2007. Toll Brothers Inc. rose 83 cents, or 4.5 percent, to $US19.45, while Pulte Homes Inc. rose 73 cents, or 6.9 percent, to $US11.29.
Ann Taylor Stores Corp. rose $US2.21, or 16.5 percent, to $US15.60 after saying its fourth-quarter earnings would top expectations on stronger sales and profit margins.
Lexmark International Inc. said lower costs helped increase its fourth-quarter earnings. The printer and copier maker rose $US2.63, or 9.8 percent, to $US29.42.
Crude oil rose $US2.37 to $US76.80 per barrel on the New York Mercantile Exchange. Gold rose.
Three stocks rose for every one that fell on the New York Stock Exchange, where volume came to 545.1 million shares compared with 478.9 million shares traded at the same point Monday.
The Russell 2000 index of smaller companies rose 4.22, or 0.7 percent, to 613.47.
Britain's FTSE 100 rose 0.7 percent, Germany's DAX index gained 1 percent, and France's CAC-40 rose 1.3 percent. Japan's Nikkei stock average rose 1.6 percent.
AP