Stocks extend gains on 14.8 percent rise in home sales; durable goods orders tops forecast

Stocks add to gains after April home sales jump

NEW YORK — Stocks rose Wednesday after gains in durable goods orders and home sales helped reassure traders that a rebound is occurring.

The Dow Jones industrial average rose about 85 points in morning trading after recovering from an intraday loss of nearly 300 points Tuesday to end down by 22. The comeback was stoked by comments from congressional leaders saying they wouldn’t push for banks to spin off their lucrative trading desks as part of financial regulation reform.

The recovery on Tuesday gave traders a break from persistent worries about European government debt and allowed them to focus on economic news.

The durable goods report gave investors further evidence the U.S. economy is improving. The Commerce Department said orders for big-ticket manufactured goods rose 2.9 percent last month, more than double the 1.3 percent gain forecast by economists polled by Thomson Reuters. It was the biggest jump in orders in three months.

The U.S. manufacturing industry has been consistently strong throughout the recovery. April’s figures were boosted by a big rise in transportation orders. Excluding transportation, orders dipped 1 percent.

The Commerce Department also reported that sales of new single-family homes rose 14.8 percent to an annual rate of 504,000 units after buyers raced to secure an expiring tax credit. That followed a 29.8 percent rise in March that was the biggest increase in 47 years. The latest gain is well ahead of estimates.

Investors’ late-day focus Tuesday on domestic news was a change from what has driven trading for the past few weeks. Investors had been almost wholly concentrating on whether steep budget cuts to manage rising debt in European countries would slow a global economic recovery in the coming months.

Although signs still point to recovery in the U.S., many concerns about Europe remain. The euro, which is used by 16 European countries, fell again Wednesday. The currency has become a proxy for investor confidence in Europe’s ability to contain its debt problems the health of the continent’s economy. The euro remains close to the four-year low it hit last week. It was down to $1.2279 Wednesday.

Kevin Giddis, managing director of fixed income at Morgan Keegan in Memphis, said the slide in stocks and the rush to Treasurys in the past month has been overdone. The economic numbers confirm that the economy is in far better shape than it was two years ago when Lehman Brothers collapsed and credit evaporated.

“It is a giant fear trade that is being overblown,” he said.

In late morning trading, the Dow rose 86.38, or 0.9 percent, to 10,130.13. The broader Standard & Poor’s 500 index rose 11.38, or 1.1 percent, to 1,085.41. The Nasdaq composite index rose 34.19, or 1.6 percent, to 2,245.14.

U.S. Treasury prices fell, driving up yields. The yield on the benchmark 10-year Treasury note rose to 3.24 percent from 3.16 percent late Tuesday.

Crude oil rose $2.62 to $71.31 per barrel on the New York Mercantile Exchange. Gold rose.

About 10 stocks rose for every one that fell on the New York Stock Exchange, where volume came to 405.5 million shares, compared with 475.7 million traded at the same point Tuesday.

The Russell 2000 index of smaller companies rose 17.36, or 2.7 percent, to 657.38.

Despite the ongoing concerns, major European indexes snapped back after big losses Tuesday.

Britain’s FTSE 100 gained 2.4 percent, Germany’s DAX index rose 2.1 percent, and France’s CAC-40 climbed 3.1 percent.