US stocks rebound on housing news; Oil shares jump

NEW YORK – The stock market rebounded Wednesday following a stronger-than-expected increase in pending home sales and a recovery in shares of energy companies. The Dow Jones industrial average rose about 226 points, its third biggest gain of 2010. Major indexes recovered the losses they suffered Tuesday shortly before the close, when the government announced criminal and civil investigations into the Gulf oil spill. Energy stocks bounced back sharply after selling off the day before. Schlumberger, which provides services to oil companies, rose more than 8 percent, while Baker Hughes gained more than 10 percent. Treasury prices fell, pushing up interest rates, after demand for riskier investments like stocks increased. The upbeat report on home sales provided some hope on the nation's housing market. An increase in signed contracts for homes was due partly to a rush to meet a tax credit that expired in April. The National Association of Realtors said its index of signed contracts for existing homes rose 6 percent. The increase was ahead of the estimates of economists polled by Thomson Reuters. "Anything that indicates more of a stabilization — and not rapid declines — in housing is probably a good thing," said Jason D. Pride, director of investment strategy at Glenmede in Philadelphia. A rise in the euro from a four-year low Tuesday also drew buyers. Movements in the euro, which is used by 16 European countries, have often steered trading in the past month. The currency is seen as a reading on confidence in Europe's ability to contain a debt crisis that began in Greece, but has spread to other parts of Europe, including Spain and Portugal. Stocks have been pounded in the last month by concerns that spending cuts in Europe would hobble a recovery in the global economy. After reaching a 2010 peak in late April, the Dow fell 7.9 percent last month for its worst May since 1940. The market has been logging big swings because traders are trying to determine how deep the retreat in stocks will be. Even with the big gains Wednesday, analysts said the fractiousness isn't likely to soon disappear. "It's a symptom of a market that doesn't have a lot of conviction about where it's going yet," said Dorsey Farr, co-founder of financial adviser French Wolf & Farr in Atlanta. The Dow rose 225.52, or 2.3 percent, to 10,249.54 after falling 235 points in the two previous days. Wednesday's climb was the biggest point and percentage climb for the Dow since Thursday, when the index advanced 285 points, or 2.9 percent. The index is still down 8.5 percent from its high this year on April 26. The Standard & Poor's 500 index rose 27.67, or 2.6 percent, to 1,098.38, while the Nasdaq composite index climbed 58.74, or 2.6 percent, to 2,281.07. Bond prices dropped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.35 percent from 3.27 percent late Tuesday. Crude oil rose 28 cents to $72.86 per barrel on the New York Mercantile Exchange. Gold fell. Analysts warn that traders are still jittery and could resume selling on one disappointing headline. That's what occurred Tuesday when the news about the oil spill investigation erased the gains that had come from upbeat reports on manufacturing and construction spending. Investors are now awaiting the Labor Department's monthly employment report, which is due Friday. It is widely regarded as the most important economic report each month because high unemployment remains a major obstacle to a sustained recovery. Economists predict the unemployment rate dipped to 9.8 percent in May from 9.9 percent in April and that employers added 513,000 jobs. Among stocks, Schlumberger Ltd. rose $4.56, or 8.8 percent, to $56.31. Baker Hughes Inc. advanced $3.76, or 10.5 percent, to $39.63. BP PLC rose $1.14, or 3.1 percent, to $37.66 after dropping nearly 15 percent Tuesday. Builder KB Home rose 28 cents, or 2 percent, to $14.01, while Hovnanian Enterprises Inc. advanced 18 cents, or 3 percent, to $6.15. Airlines rose following upbeat comments from analysts. Continental Airlines Inc. climbed $2.25, or 11.1 percent, to $22.54, while US Airways Group Inc. advanced 80 cents, or 9.3 percent, to $9.44. Five stocks rose for every one that fell on the New York Stock Exchange, where consolidated fell to 5.1 billion shares compared with 5.3 billion Tuesday. The Russell 2000 index of smaller companies rose 19.56, or 3.1 percent, to 660.52. Britain's FTSE 100 fell 0.2 percent, while Germany's DAX index and France's CAC-40 each slipped less than 0.1 percent. Japan's Nikkei stock average dropped 1.1 percent. — AP