Stocks rise for 3rd straight day after report showing big jump in home sales

Stocks rise for 3rd day after jump in home sales

NEW YORK — Stocks pushed higher for a third straight day after a surprisingly strong report on housing provided the latest evidence that the economy is picking up speed.

All major indexes gained less than 1 percent Tuesday, with the Standard & Poor’s 500 index and the Nasdaq composite index closing at new highs for the year. The Dow Jones industrial average rose 50 points, bringing its three-day point gain to 156.

Stocks got off to a positive start after a report from the National Association of Realtors said home resales jumped 7.4 percent in November. That was much more than the 2.5 percent increase analysts expected. The government’s tax breaks have spurred sales to their highest level in nearly three years.

The report added to a recent string of encouraging news on the economy, including upbeat earnings and forecasts from technology companies and more corporate dealmaking.

“It’s just another rung in the recovery ladder,” said Brett D’Arcy, chief investment officer at CBIZ Wealth Management Group.

There were other signs that investors were feeling more confident. Bond prices fell further, pushing yields sharply higher. The gap between yields on short- and long-term bonds has widened to record levels, indicating that investors see the economy growing.

Meanwhile, the dollar rose against the euro as investors bet that the U.S. will recover quicker than economies in Europe. And a gauge of the market’s volatility dropped to its lowest point since May 2008. The Chicago Board Options Exchange’s Volatility Index, known as the market’s fear index, fell 4.6 percent to 19.54, after earlier falling as low as 16.26. It hit a record 89.5 last October during the height of the financial crisis.

D’Arcy said he expects the positive outlook on the economy to build on itself and to continue to propel the market forward through the end of the year.

The Dow Jones industrial average rose 50.79, or 0.5 percent, to 10,464.93. The Standard & Poor’s 500 index rose 3.97, or 0.4 percent, to 1,118.02, while the Nasdaq composite index rose 15.01, or 0.7 percent, to 2,252.67. Both the S&P 500 and the Nasdaq are at their highest levels since last October.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to its highest level since August, climbing to 3.76 percent from 3.68 percent late Monday.

The yield on the three-month T-bill rose to 0.06 percent from 0.05 percent. Short-term rates have remained low, staying in line with the Federal Reserve’s benchmark interest rate, which has been kept at a record level of near zero this year.

However, long-term yields have been on the rise, an indication to some that investors have become more sure of the economy’s strength and see an increasing potential for inflation. Inflation is bad for bonds because it eats into their fixed returns. Some analysts say the sharp rise in rates is more technical, coming after months of very low long-term bond yields.

The dollar rose as a third credit-rating agency downgraded Greece’s government bonds. Worries have been rising in recent weeks about debt levels in Greece, Ireland, Spain and Portugal, leading investors to sell other currencies and buy the dollar.

Gold prices fell to their lowest level since early November, while oil prices reversed an early slide and rose 68 cents to $74.40 a barrel on the New York Mercantile Exchange.

Wall Street typically does well in late December. Since 1950, the average return for the Dow during the week leading up to Christmas was 0.7 percent, according to Schaeffer’s Investment Research. And the week following Christmas, the average return was 0.8 percent. The year-end advance is commonly known as a Santa Claus rally.

Investors were able to shrug off a government report revising lower third-quarter gross domestic product. The Commerce Department’s new reading on GDP showed a growth rate of 2.2 percent, down from the previous estimate of 2.8 percent. The growth came after a record four quarters of decline.

About three stocks rose for every two that fell on the New York Stock Exchange, where consolidated volume came to 3.7 billion shares, down from 4.0 billion on Monday.

Trading is expected to be light throughout the holiday-shortened week, which can exaggerate price swings. The market is open a half day on Thursday and closed Friday for Christmas.

In other trading, the Russell 2000 index of smaller companies rose 5.00, or 0.8 percent, to 623.60.

Overseas, Japan’s Nikkei stock average jumped 1.9 percent. Britain’s FTSE 100 rose 0.7 percent, Germany’s DAX index gained 0.3 percent, and France’s CAC-40 rose 0.7 percent.