Stocks soar on existing-home sales

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NEW YORK (AP) -- Stocks surged yesterday on signs of resilience in the housing market and the U.S. consumer, with falling oil prices giving investors an extra reason to rally. The Dow Jones Industrial Average gained more than 120 points.

The National Association of Realtors' index for pending sales of existing homes rose in February at a seasonally adjusted annual rate of 0.7 percent. The index is well below where it was a year ago but stronger than investors expected, reassuring them that the housing sector, while weak, is not being pummeled by the struggling subprime mortgage sector.

"That says people are getting mortgages, people are buying houses, people have incomes, jobs, all that good stuff," said Kim Caughey of Fort Pitt Capital Group. "You'd never go out and buy a house if you think you're going to get laid off. Consumers are optimistic about the future, and as we all know, the consumer drives this economy."

A report from Redbook Research showed that consumers spent more at chain stores in March than they did in February, while Toyota reported a steep increase in U.S. sales in March.

A decline in crude oil prices, waning as tensions eased between Britain and Iran, also encouraged investors.

The Dow rose 128, or 1.03 percent, to 12,510.30. The blue chip index is back in positive territory for the year, and 276 points below its record close of 12,786.64, reached Feb. 20.

The Standard & Poor's 500 Index gained 13.22, or 0.93 percent, to 1,437.77, and the Nasdaq Composite Index added 28.07, or 1.16 percent, to 2,450.33. The Russell 2000 Index of smaller companies rose 8.55, or 1.06 percent, to 811.77.

Bonds were lower, with the yield on the benchmark 10-year Treasury note at 4.67 percent, up from 4.65 percent late Monday.

Light sweet crude dropped more than a dollar to $64.64 a barrel on the New York Mercantile Exchange. Prices had surged when 15 British sailors and marines were detained March 23 by Iran, but the two nations are in negotiations that appeared to be bringing the captives closer to release.

Airline stocks climbed on the prospect of declining fuel costs, as well as a rise in Continental Airlines Inc.'s passenger revenue. Continental Airlines rose $3.03, or 8.4 percent, to $39.08.

Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange.

Some analysts noted that while yesterday's stock gains were strong, the market is still vulnerable, especially with earnings season less than two weeks away.

"I don't think we're out of the woods yet," said John O'Donoghue of Cowen & Co., noting that some of the market's gains were probably because of frustrated traders short-covering, or buying back bets that prices would fall. "The market has exhibited a certain amount of complacency. We'll see how earnings come in."

Investors are treading fairly optimistically toward the first quarter earnings season. So far, there have been a few profit warnings -- notably from a few home builders -- but some investors had braced for more dire-earnings preliminary announcements.