Stock market rebounds

Housing, earning reports turn around worst day

Strong housing and earnings reports helped stocks rebound from their worst day of the year.

The Dow Jones industrial average rose 157.58 points, or 1.1 percent, on Tuesday, to 14,756.78, winning back more than half of the 265 points it lost a day earlier. The Standard & Poor’s 500 index logged its second-best day of the year. The S&P 500 climbed 22.2 points, or 1.4 percent, to 1,574.57.

Home construction topped 1 million last month, the highest level since June 2008. Robust earnings from companies including Coca-Cola also propelled the market higher.

A recovery in housing and a pickup in hiring were major catalysts driving the stock market’s surge early this year. The Dow and the S&P 500 jumped 11.3 percent and 10.3 percent, respectively, in the first three months of 2013.

That runup was interrupted Monday, when stocks had their biggest decline since November. Worries about an economic slowdown in China led to a drop in prices for oil, copper, and other commodities, causing mining and energy stocks to fall. The rally had already slowed earlier this month after reports of weak hiring and retail sales suggested that the economy was cooling off.

“This is the first time in a while that we’ve had pretty positive numbers,” said JJ Kinahan, chief derivatives strategist for TD Ameritrade. “We had one bad day …. You can’t say because of that one bad day that all bets are off.”

While Chinese growth fell short of expectations, Monday’s sell-off may have been disproportionate to the slight slowdown in China’s growth.

The world’s second-biggest economy still expanded at a rate of 7.7 percent in the first three months of the year, slowing from 7.9 percent the previous quarter and missing analysts’ expectations by just 0.3 percentage points. China is watched closely because it is a major market for foreign goods from iron ore to smartphones. Investors hope demand from China can help offset weakness in the U.S., Europe and Japan.

Mining companies rose Tuesday as commodities markets stabilized and materials stocks gained the most of the 10 industry groups in the S&P 500 after leading the market lower the day before. Home builders advanced following the housing report. PulteGroup rose 4.2 percent to $18.60 and Lennar climbed 2.4 percent to $38.70.

Gold, which was at the epicenter of Monday’s sell-off, rose 1.9 percent to $1,387.40 an ounce. Gold is down 27 percent since it climbed to a record in August 2011, when lawmakers wrangled over raising the debt ceiling and threatened to push the U.S. into default.

Investors should expect a more volatile stock market until there is more confirmation that the economy is strengthening and the outlook for companies is improving, said Jeff Morris, head of U.S. equities at Standard Life Investment.

“Until we get evidence of more robust conditions in the second half we’re going to be in more of a sideways market,” said Morris. “You saw a fairly dramatic move yesterday; that’s indicative of a market that’s not quite sure of which direction to go.”

While the Dow is up this month, the pace of gains is slowing and the index is on track to log its weakest month of the year. The Dow has risen 1.2 percent in the first two weeks of April, compared with an average monthly gain of 3.6 percent in the first quarter.

Small company stocks rose more than the broader market Tuesday, a sign that investors are moving money into riskier assets. The Russell 2000 index climbed or 1.8 percent to 922.30. That’s a reversal from the day before, when the index plunged 3.8 percent.

In other trading, the Nasdaq composite rose 48.14 points, or 1.5 percent, to 3,264.63.

In other news:

COCA-COLA: It gained $2.28, or 5.7 percent, to $42.37 after its first-quarter results came in above Wall Street’s forecasts. Coke said it struck a deal to start refranchising its business in the U.S., which will lower costs.

W.W. GRAINGER: The seller power tools and other industrial equipment, rose $16.18, or 16.2 percent, to $241.88 after the company said its first-quarter net income climbed 13 percent.

WHIRLPOOL: It jumped $3.66 to $116.78 after the appliance maker raised its quarterly dividend 25 percent to 62.5 cents.

GOLDMAN SACHS: It reported a strong first quarter, but analysts are more concerned about the bank’s future than the past three months. They peppered the chief financial officer with questions about impending regulations, and investors sent Goldman’s stock down even as other banks rose.

JOHNSON & JOHNSON: First-quarter profit fell by just over 10 percent as increased sales were offset by higher costs.

INTEL: The Santa Clara, Calif., chipmaker met analyst forecasts for the just-ended quarter. It earned $2 billion, or 40 cents per share, in the January to March period.

That was down 27 percent from $2.74 billion, or 53 cents per share, a year ago. Revenue was $12.6 billion, slightly below the midpoint of Intel’s own forecast range. The figure was down 2.3 percent from $12.9 billion a year ago.

YAHOO: Its Internet advertising revenue crumbled further during the first three months of the year and overshadowed a surge in the company’s earnings.

TARGET: It says its first-quarter profit will miss forecasts due to weaker-than-expected sales of seasonal items.

CSX: The railroad says its first-quarter profit chugged ahead 2 percent as a decline in coal revenue was offset by rate increases for other shipments.

GENERAL MOTORS: GM plans to unveil a line of revamped midsize pickups later this year with gas mileage and features designed to take sales from Toyota’s Tacoma.