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Stocks rebound on home prices, earnings; Dow up 99

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By The Associated Press
Tuesday, Feb. 5, 2013, 5:02 p.m.
 

NEW YORK — The stock market bounced back on Tuesday as home prices surged and Europe's economy showed signs of recovery. Strong earnings reports also helped power the gains.

The Dow Jones industrial average ended the day 99.22 points higher at 13,979.30, erasing a large part of its loss from Monday. The index traded above 14,000 during the day before falling back in the last hour.

The Standard & Poor's 500 gained 15.59 points to 1,511.29. The Nasdaq composite was up 40.41 points to 3,171.58.

The rise follows two days of whiplash. On Monday, the Dow dropped 129 points, its worst sell-off of the year so far, as fears about Europe's finances resurfaced. The index gained 149 points Friday, closing above 14,000 for the first time since 2007.

With strong gains for stocks this year, investors are wondering whether they should sell now, or wait and see if the rally still has legs, said Brad Reynolds, chief investment officer at LJPR Inc.

Tuesday's advance was driven by data showing U.S. home prices rose in December at the fastest pace in more than six years. CoreLogic, a real estate data provider, reported that home prices rose 8.3 percent. In Europe, a measure of manufacturing and service businesses rose to a 10-month high January.

Stocks have gotten off to a strong start this year. The Dow advanced 5.8 percent in January, its best start to the year since 1994, according to data compiled to S&P Dow Jones indices. The S&P 500 rose 5 percent last month.

Lance Roberts, chief economist at Streettalk Advisors in Houston, Texas, said that's related more to the Federal Reserve's commitment to keep money cheap than to companies' performance. If earnings are beating estimates, he said, it's largely because expectations were so low.

The fact that individual investors are starting to return to stocks, as they have in recent weeks, is the latest sign that the market is due for a correction, Roberts and other analysts have said.

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