Stocks rose Monday after a better-than-expected jump in sales of new homes and shipping giant FedEx raised its profit outlook.
The Dow Jones industrial average moved back into the black for the year, closing up 100.81 points at 10,525.43, up nearly 1%. The Nasdaq composite gained 26.96 points to close at 2,296.43, a 1.19% gain. The Standard & Poor's 500 index, which is still down less than 1% for the year, increased by 12.29 points to close at 1,114.95, a 1.12% jump.
Major indexes all rose after the Commerce Department said sales of new homes rose to an annual rate of 330,00 units in June. The increase cames after sales hit a record low rate of 267,000 in May. Economists polled by Thomson Reuters had forecast sales would rise to a rate of 320,000.
Analysts said the unexpected jump in sales is a positive sign for a beleaguered housing market.
"Even though the data was soft, it was better than economists expected and that was the first time that has happened in a while," said Jeffrey Kleintop chief market strategist for LPL Financial.
The home sales gain gave investors a glimmer of hope for the housing market and sent prices for home builders higher.
Sales had fallen sharply in May after a tax credit for home buyers expired at the end of April. Investors have been concerned that the credit was propping up the housing market and that sales would stay at low levels now that buyers have fewer incentives.
FedEx gave the market more encouraging news about the economy by raising its earnings forecast. Like UPS, FedEx is seen as an economic bellwether since companies tend to ship more when their orders increase. FedEx said it was seeing better than expected growth in its overnight and ground delivery businesses.
Stocks have rallied in recent days as more companies reported strong second-quarter results and improved outlooks for the coming quarters.
"There's been too much negativism priced in and we're coming off that," said Brian Gendreau, market strategist at Financial Network Investment. "Earnings reports are definitely helping."
Bond prices dipped after the housing report. The yield on the 10-year note, which moves opposite its price, rose to 3.03% from 3.00% late Friday. That yield helps set interest rates on mortgages and other consumer loans.
Investors are watching a key technical level on the S&P 500 of 1,110. Pushing above that level would indicate optimism is growing in the market. However if the market cannot climb and hold above that level, it could lead to a pullback, analysts said.
Earnings reports are likely to be a big driver of trading again this week as hundreds more companies in the S&P 500 release results.
Earnings results due out Tuesday from oil company BP will be closely watched because of reports that BP CEO Tony Hayward will step down and that BP could take a big charge to cover costs of cleaning up the oil spill in the Gulf of Mexico.
Investors are also preparing for the first reading on second-quarter gross domestic product, the broadest measure of economic growth.
The GDP report, due Friday, is expected to show just modest growth after stronger gains earlier in the year. The slowdown would be due to the withdrawal of government stimulus measures.
Even with a modest slowing of the economy, there are no signs that it is going to fall back into recession, says Jim Meyer, chief investment officer at Tower Bridge Advisors.
"The rolling over of the economy Wall Street thinks it sees just isn't taking shape," Meyer said.
European markets rose slightly as investors had their first chance to react to a series of tests that assessed the health of the continent's big banks. Regulators said only seven of the 91 banks tested would struggle if the European economy and government debt problems worsened.
Britain's FTSE 100 rose 0.7%, Germany's DAX index rose 0.5%, and France's CAC-40 gained 0.8%. Japan's Nikkei stock average rose 0.8%.
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