NEW YORK (AP) - Investors restarted Wall Street’s rally Tuesday, buying financial and homebuilder stocks following a surprisingly upbeat report on housing starts.
The Commerce Department’s report that new home construction rose unexpectedly to an annual rate of 583,000 in February more than offset any concerns from news that Alcoa Inc. is cutting its dividend and Nokia Corp. is laying off 1,700 workers.
The market fluctuated throughout the session before turning higher in the afternoon. Investors were also awaiting the outcome of the Fed’s two-day meeting that ends Wednesday. The Fed is widely expected to leave interest rates at their current historically low levels, but the market will be keen to see how the central bank sizes up the economy in its statement that accompanies its rate decision.
Wall Street held on to the positive tone that sent stocks rallying for four straight days last week; investors took a break on Monday, sending the market moderately lower.
Craig Peckham, a market strategist at Jefferies & Co. Peckham said it was encouraging that Alcoa’s dividend cut did not send “shockwaves” through the market, as it would have done just weeks ago.
“Investors are able to brace themselves for this kind of news” now, he said.
Brett D’Arcy, chief investment officer at CBIZ Wealth Management, said relatively quiet trading the past two days is “a great sign” because it means investors are holding on to gains from week and aren’t trying to grab quick profits. That is an indication of positive momentum and a base forming for the market, he added.
Both the Dow Jones industrial average and Standard & Poor’s 500 index gained around 10 percent last week.
In afternoon trading, the Dow rose 90, or 1.25 percent, to 7,306.97. The S&P 500 rose 13.39, or 1.78 percent, to 767.28, while the tech-laden Nasdaq composite index rose 30, or 2.14 percent, to 1,434.02.
D’Arcy said technology companies could be getting an extra boost as investors move back into those stocks after they fell sharply Monday. He said the industry’s relative fundamental strength makes it attractive for long-term investors.
The Russell 2000 index of smaller companies rose 9.74, or 2.52 percent, to 396.10.
Advancing issues outpaced decliners by about 5 to 2 on the New York Stock Exchange, where volume came to 724 million shares.
Tuesday’s economic data followed a handful of reports over the past few weeks that were better than expected; that gave some support to stocks.
The Commerce Department said new home construction rose to an annual rate of 583,000 in February from a revised 477,000 in January. Economists forecast construction would drop to a pace of around 450,000 units, according to Thomson Reuters. Building permit applications, a key measure of future activity, also rose unexpectedly.
Tim Courtney, the chief investment officer at Burns Advisory Group, said the report was encouraging and could be part of an initial recovery in the housing market.
“We could be in the very early stages of some kind of normalization” in housing, he said. A housing recovery is widely seen as a key to helping end the recession.
D’Arcy said the housing numbers have given some support for homebuilders _ an industry that has been decimated by the continued housing slump. Centex Corp. rose more than 7 percent, gaining 49 cents to $7.38. Toll Brothers Inc. rose 87 cents, or 5.4 percent, to $16.98.
Financials, which led the rally last week, were again helping stocks advance. Citigroup Inc. rose 10 cents, or 4.3 percent, to $2.43. JPMorgan Chase & Co. rose $1.09 or 4.7 percent, to $24.18.
The KBW Bank Index, which tracks 24 of the nation’s largest banks, jumped 2.9 percent to 26.28.
Meanwhile, the Labor Department said wholesale prices rose 0.1 percent in February after rising 0.8 percent in January. Economists predicted the producer price index would rise 0.4 percent during the month. The government said core inflation, which excludes energy and food, edged up 0.2 percent in February after rising 0.4 percent in January.
Courtney said additional positive news on top of last week’s gains is starting to lure investors back into the market and helping build momentum that “could last for a while.”
While investors wait for the Fed meeting to end, Peckham said individual company announcements can have a bigger impact on the market.
Technology giants Apple Inc. and Dell Inc. were unveiling new products. Apple is launching a new version of software for its popular iPhone, while Dell is launching new laptop computers.
Apple jumped $2.14, or 2.2 percent, to $97.56. Dell rose 18 cents, or 2 percent, to $9.08.
But, other companies are demonstrating the economy remains weak. Alcoa became the latest Dow Jones industrial to lower its dividend to conserve cash. The aluminum maker said after the market closed Monday it was cutting its quarterly dividend 82 percent to 3 cents. It also said it plans to sell stock and debt to help reduce annual costs by more than $2.4 billion.
“We’re seeing a management team remind us just how tough the fundamental economy is performing,” Peckham said. Alcoa fell 49 cents, or 8 percent, to $5.63.
Nokia, the world’s top mobile phone maker, said it will lay off 1,700 people worldwide to cut costs. Nokia pared its losses, falling 5 cents to $11.30. The mobile phone market has been suffering as consumers spend less during the recession.
Meanwhile, bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.99 percent from 2.96 percent late Monday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.24 percent from 0.23 percent late Monday.
The dollar was mixed against other major currencies, while gold prices fell.
Oil prices rose $1.90 to $49.25 a barrel on the New York Mercantile Exchange.
Overseas, Japan’s Nikkei stock jumped 3.2 percent. Britain’s FTSE 100 fell 0.2 percent, Germany’s DAX index declined 1.4 percent, and France’s CAC-40 fell 0.9 percent.
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