Stocks moved higher on Tuesday as investors bet that April's slide in U.S. housing starts and permits signaled that the housing market may soon stabilize as the supply of new homes dwindles.
U.S. housing starts and permits fell unexpectedly to record lows in April, hitting shares in some residential construction companies such as Centex Corp
International Business Machines
Analysts said while the housing data pointed to more headwinds in the sector, less new construction should bode well for the market in the long run as home inventories fall.
Housing starts coming down can almost be seen as progress, said Linda Duessel, market strategist at Federated Investors in Pittsburgh. We've got to keep the housing starts off because there's still too many houses, there are still way too many vacant homes that need to be sold.
Stability in the U.S. housing market is seen as key to restoring consumer confidence and stemming the flow of foreclosures that have hit financial institutions.
The Dow Jones industrial average <.DJI> added 28.51 points, or 0.34 percent, at 8,532.59. The Standard & Poor's 500 Index <.SPX> gained 5.27 points, or 0.58 percent, at 914.98. The Nasdaq Composite Index <.IXIC> rose 12.05 points, or 0.70 percent, at 1,744.41.
U.S. stocks recovered more than half of their losses on Monday, following their worst week in two months, on the back of stronger-than-expected results from Lowe's Cos Inc
The S&P 500 has climbed from a 12-year closing low on March 9, rising 37.4 percent through the close on May 8. But the benchmark index gave up some ground last week amid profit-taking and disappointment with April retail sales.
On Tuesday, the Chicago Board Options Exchange Volatility index <.VIX>, also known as Wall Street's fear gauge, fell below 30 for the first time in eight months, extending a pullback from the bear market lows of early March.
Shares in energy companies rose as oil continued to push toward $60 per barrel. Exxon Mobil Corp
Retailers also posted advances, with the S&P retail index up 0.6 percent. Department store Saks Inc
Home Depot also posted a stronger-than-expected quarterly profit, but its shares fell 4.6 percent to $24.82, making the stock the Dow's top drag. Investors said the results were disappointing compared to rival Lowe's.
Shares of American Express Co
JPMorgan Chase & Co
On Nasdaq, shares of Apple Inc
Separately IBM's Chief Financial Officer Mark Loughridge told a Reuters Technology Summit in New York that the technology services giant expects margins to improve this year.
(Editing by Padraic Cassidy)