Stocks rally after recent shocks

NEW YORK, NY - MAY 07: The New York Stock Exchange is seen on May 7, 2013 in New York City. The Dow closed above 15,000 for the first time ever, hitting 15,056. (Photo by Spencer Platt/Getty Images) Spencer Platt

NEW YORKWall Street focused on good news about the U.S. economy, sending stocks higher Tuesday.

After weeks of worrying over how the economy will weather a pullback in the Federal Reserve's stimulus, traders were encouraged by three reports.

U.S. businesses got more orders for long-lasting manufactured goods, the Commerce Department said Tuesday. The Standard & Poor's/Case-Shiller 20-city home price index showed year-over-year gains for the fourth straight month, a sign that housing continues to recover. And consumer confidence rose sharply in June to the highest level in more than five years, bolstered by an improving outlook for hiring, the Conference Board reported.

The Dow Jones industrial average rose 100 points to 14,760. It had been up 152 points earlier. The Standard & Poor's index was up 14 points, or 1 percent, to 1,588. It had been up 20 points an hour earlier. The Nasdaq composite gained 27 points to 3347.

Bank stocks, which sank the day before, rose the most of the 10 industry groups in the index.

Homebuilders including Toll Brothers and KB Home rose after the Case-Shiller report. So did homebuilder Lennar, which also reported quarterly results that beat analysts' expectations. In the afternoon, Lennar was up 15 cents, 0.4 percent, to $35.14.

Investors appeared less worried about the Fed slowing its bond-buying program. Last Wednesday, Federal Reserve Chairman Ben Bernanke said that he expects the central bank to stop buying $85 billion-a-month in bonds by the middle of 2014 if it feels the economy can manage without that stimulus.

Over the next four days, the Dow had three triple-digit selloffs. Since May 21, the day before Bernanke first hinted at a possible Fed pullback, the Dow has fallen 4 percent.

Jonathan Lewis, chief investment officer at Samson Capital Advisors, said he thought that the market's Tuesday morning gain was partly due to investors taking a less reactive view of the Fed's potential plans.

"This is the day," Lewis said, "where the dust appears to be settling."

Though Tuesday's economic news pushed stocks higher, that wasn't the guaranteed reaction. Investors have sold stocks after positive reports in recent weeks, afraid that the Fed would pull back on its stimulus too quickly.

Stocks could fall later this week because the second quarter ends Friday, and money managers need to book profits for their clients.

The stronger economic news led investors to sell U.S. government bonds, a sign that they're more comfortable putting money in stocks. The yield on the 10-year Treasury note, a benchmark for many types of loans, rose to 2.59 percent from 2.54 percent late Monday. That's part of a longer-term trend: Investors have been selling bonds in anticipation of the Fed winding down its bond-buying program.

Earlier in Asia, the Shanghai Composite Index pulled back from steeper losses to close down 3.73 points, or 0.2 percent, to 1,959.51. The index fell 5 percent the day before, its biggest loss in four years.

The index recovered after China's central bank tried to quell fears that the country faces a credit crisis.

The central bank promised "liquidity support" if needed after a shortage of money in credit markets caused the interest rate that banks must pay to borrow from each other to spike last week.

The price of gold fell $2.20 to $1,274 an ounce, and the price of crude oil rose 5 cents to $95.23 a barrel.

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