Construction, Home Sales Spur Stock Rally

Dow Jumps Over 200 Points Even As Investors Anxiously Eye Release Of Banks' Evaluations Later This Week

(CBS/AP)  If investors are worried about the results of government stress tests on the banking industry due out later this week, they aren't showing it.

Stocks surged Monday with all major indexes gaining well over 2 percent, including the Dow Jones industrial average, which added more than 200 points. Investors were buoyed by news that construction spending rose unexpectedly in March after five straight declines and pending home sales jumped more than expected.

Investors have been more upbeat about prospects for the economy in the last two months and Monday's reports bolstered the case that the economy's slide could be slowing.

The Commerce Department reported Monday that construction spending increased 0.3 percent in March, the best showing since a similar rise last September. Economists surveyed by Thomson Reuters had expected spending to drop 1.5 percent.

The surprising rebound may be temporary, however, given all the problems facing the industry. The worst housing slump in decades and a severe financial crisis have made it hard for builders to obtain financing.

Still, pending U.S. home sales rose more than expected in March. The National Association of Realtors said Monday its seasonally adjusted index of pending sales for previously occupied homes rose 3.2 percent to 84.6. Economists expected a reading of 82.1.

The index was 1.1 percent above last year's levels and has risen for two straight months after hitting a record low in January. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.

The positive economic reports come as Wall Street readies itself for the results of the government's stress tests of the 19 largest U.S. banks - due out Thursday. Many investors anticipate that the tests - designed to determine which banks would need more cash if the recession worsens - will show that several banks need more capital.

Regulators have already told Wells Fargo & Co. to shore up its finances and investors are particularly concerned about the future of Citigroup Inc. and Bank of America Corp.

Initial results indicated that both banks would also be among the group needing more capital, sources told The Associated Press last week. The Financial Times reported Sunday that the banks are working on plans to raise more than $10 billion each as they negotiate with regulators over the findings of the stress tests.

But the new economic data and media reports that the stress tests could reassure the market helped financial stocks. Citi rose 13 cents, or 4.4 percent, to $3.10, while Bank of America rose 46 cents, or 5.3 percent, to $9.16.

Investors will also be looking to a number of key economic reports this week - among them the closely watched employment report on Friday - for further validation that the economy is beginning to heal.

According to preliminary calculations, the Dow Jones industrial average rose 214.33, or 2.61 percent, to 8,426.74. The Standard & Poor's 500 index added 29.72, or 3.39 percent, to 907.24, while the Nasdaq 100 index gained 44.36, or 2.58 percent, to 1,763.56.

Market sentiment has been improving and an increasing number of reports suggest the economy's slide is easing. But there is still evidence of pain: Chrysler LLC filed for bankruptcy last week, and many companies continue to report weak first-quarter results.

Stocks gained about 1.5 percent last week despite concerns about a potential swine flu pandemic and Chrysler's bankruptcy filing.

In dealmaking, Italian automaker Fiat confirmed Sunday it is in talks to buy most of General Motors Corp.'s European operations. GM has been trying to find buyers for its noncore, unprofitable businesses to help it avoid bankruptcy. Fiat is also in the process of acquiring a stake in Chrysler.

Sprint Nextel Corp. reported a first-quarter loss, but beat expectations. The nation's third largest wireless carrier said its revenue fell and it took a charge related to job cuts. The stock jumped 51 cents, or 10.9 percent, to $5.18.

In other trading, the Russell 2000 index of smaller companies rose 11.68, or 2.4 percent, to 498.66.

Five stocks rose for every one that fell on the New York Stock Exchange, where volume came to 383.2 million shares.

The rally in stocks damped demand for the safety of government debt. That pushed the yield on the benchmark 10-year Treasury note up to 3.19 percent from 3.16 percent late Friday.

The dollar was mixed against other major currencies, while gold prices rose.

Light, sweet crude rose 52 cents to $53.72 on the New York Mercantile Exchange.

Overseas, Hong Kong's Hang Seng index jumped 5.5 percent. In afternoon trading, Germany's DAX rose 2.5 percent and France's CAC-40 gained 2.2 percent. Markets in Japan and London are closed for holidays.

[FrankDenise]

Just another bullshi* snowjob from our goverment and media....Because these jerks say things are looking better Im gonna believe it...Guess again...Let me run right out and start spending because THEY say it looks better.....Just another stroke job from the boys in Washington...If you think this country cares about us your a bigger fool than I thought.It cares about its own power and maintaining it....I hope hell is kept hot for them all...

[formrusmcsgt]

Monday's reports bolstered the case that the economy's slide could be slowing.
---

Limbaugh is surely pissed.....

[rhs648]

"The market goes up, then Average Joe get's in, " There's your problem right there. The sensible person gets in when the stock is cheap. The dumb one gets in when it's at or near the top.
Posted by voxpopulus

You are correct. Most people understand this concept intellectually but, emotionally can not bring themselves to buy stocks when the market is down. My niece's husband is a stock broker and marvels at how unconcerened I am when the market is down. That is when I become busy buying mutual funds. When the market is down, equities sell at bargain basement prices. Having lived through many recessions, the market has always rebounded. One simply has to be patient.

[voxpopulus]

"The market goes up, then Average Joe get's in, " There's your problem right there. The sensible person gets in when the stock is cheap. The dumb one gets in when it's at or near the top.

[voxpopulus]

To be a Republican these days means you have to try to talk the economy down. And criticize every attempt to boost it. What a wacky world we live in

[MnST4AleNz]

It doesn't matter how fast we get back on track... the cynics and skeptics won't admit that President Obama's plan is working......sad.
Posted by blog_fever2 at 10:52 AM : May 4, 2009

You call this working?

It took until MAY for the market to rise higher than it opened in the morning of Jan 20.

That's like taking three months to fill one cup of coffee.

[WITHINMEANS]

SOMEONE NAME THE CHURCH HE ATTENDS.
Posted by pythoncharly at 8:36 AM : May 4, 2009

Why it is the church of my or the water board way. That was too easy.

Actually Montana has better requlation than you imply, Check where your credit card satements come from. It is North Dakota and the like.

[nikosk11]

"Investors have been more upbeat about prospects for the economy in the last two months and Monday's reports bolstered the case that the economy's slide could be slowing."

'I want Obama to fail." Russ Windbag Limbaugh.

[WayAround]

Livinontheedge wrote: "These numbers are not government generated. They are generated by the housing industry The mational association of Realtors."

Read the article before you get diarrhea of the keyboard, meathead.

From the article: "The Commerce Department reported Monday that construction spending increased"

[blog_fever2]

It doesn't matter how fast we get back on track... the cynics and skeptics won't admit that President Obama's plan is working......sad.

[impeachbhb]

Don't worry the Communist in Chief will take care of any improvements in the capitalist economy. They are roadblocks to his implementing his socialst government.

[WayAround]

Hey, CBS, why didn't you report this story (from Google Finance):

"Two large providers of U.S. home loans during the housing boom, Accredited Home Lenders Holding Corp and Thornburg Mortgage Inc, filed for Chapter 11 bankruptcy on Friday"

You know, America is burning, and the public is fiddling because the loudspeakers (news media) keep playing music that's easy on the ears (like the current article "Construction, Home Sales Spur Stock Rally", which is based on government-generated statistics).

[BeckieBest]

More bad news for the party of NO.


lol!

[whitemale08]

Folks, the Stress-Tests are a joke.

Moody's was basicly shut down for falsifying their ratings on junk worthless derivatives and credit-default swaps and now the government needs another Moodys.

Who's the next Moodys?

STRESS TESTS!

JUST CALL CONGRESS AND DEMAND GOLDMAN SUCKS, JP MORGAN BofA AND OTHERS TO GO INTO RECEIVERSHIP AND BANKRUPTCY RE-ORGANIZATION!

DEMAND THAT THE BANKS AND HEDGE FUNDS STOP COMING UP WITH TRICKS TO FOOL THE AMERICAN TAXPAYER TO UN-LOAD THEIR WORTHLESS DERIVATIVES AND CREDIT-DEFAULT SWAPS ONTO PENSION FUNDS AND 401(K)s!