Stocks edge higher as home sales climb from record lows; FedEx raises outlook

Stocks edge higher on gain in new home sales

NEW YORK — Stocks rose moderately Monday after the government reported a better-than-expected jump in new home sales and shipping giant FedEx Corp. raised its profit outlook.

The Dow Jones industrial average rose 74 points in afternoon trading, moving back into the black for the year.

Major stock indexes rose after the Commerce Department said sales of new homes increased to an annual rate of 330,000 units in June. The gain came after sales hit a record low in May. The sales came in ahead of the estimates of economists polled by Thomson Reuters.

Analysts said the unexpected jump in sales was 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 awhile,” 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 homebuilders higher. D.R. Horton Inc., Lennar Corp. and Toll Bros. Inc. rose more than 2 percent after the report.

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 Inc., 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 Corp. “Earnings reports are definitely helping.”

In afternoon trading, the Dow rose 74.70, or 0.7 percent, to 10,499.32. The Standard & Poor’s 500 index rose 9.55, or 0.9 percent, to 1,112.21, while the Nasdaq composite index rose 21.05, or 0.9 percent, to 2,290.52.

About four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 694 million shares.

Bond prices were narrowly mixed. The yield on the 10-year note, which moves opposite its price, was unchanged at 3.00 percent compared with late Friday. That yield helps set interest rates on mortgages and other consumer loans.

D.R. Horton rose 28 cents, or 2.6 percent, to $11.13. Lennar jumped 40 cents, or 2.7 percent, to $15.33, while Toll Bros. rose 35 cents, or 2 percent, to $17.82. FedEx jumped $4.14, or 5.2 percent, to $83.10.

Investors are watching a key psychological level in the S&P 500: 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 CEO Tony Hayward will step down and that the company could take a big charge to cover costs of cleaning up the oil spill in the Gulf of Mexico.

BP shares jumped $1.55, or 4.4 percent, to $38.40.

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 percent, Germany’s DAX index rose 0.5 percent, and France’s CAC-40 gained 0.8 percent. Japan’s Nikkei stock average rose 0.8 percent.