Market Bounces Back on Reassuring News on Housing and Banking

Investors returned to the stock market on Monday, driven by positive news about housing and banking, resulting in the Dow Jones industrial average rising 235 points, its largest daily gain in over a month, and making up nearly three-quarters of last week's losses. The major indexes rose about 3 percent, with stocks in the home-building and financial sectors surging on the news. Analysts believe that stability in these industries is crucial for the economy's recovery, but warning that the market may remain volatile as investors look for signs of a genuine rebound, not just a slowdown in the decline.

Key Takeaways:

• The Dow Jones industrial average rose 235 points, its largest daily gain in over a month, making up nearly three-quarters of last week's losses.
• The major indexes rose about 3 percent, with stocks in the home-building and financial sectors leading the charge.
• Lowe's Cos. reported better-than-expected earnings, raising its full-year profit outlook, and boosting investor confidence.
• The National Association of Home Builders said its housing market index rose in May for the second month in a row, indicating growing optimism among builders.
• Analysts issued positive outlooks for the banking industry, foreseeing "explosive earnings growth and unusually strong stock price performance" for banks as the economy recovers.
• Goldman Sachs raised its rating on Bank of America Corp. to "buy" on expectations for solid earnings in the second quarter.
• Analysts emphasize the importance of stability in the housing and banking industries for the economy's recovery, but note that the market may remain volatile.

Statistics:

• The Dow Jones industrial average rose 235 points, a 3 percent increase.
• The major indexes rose about 3 percent.
• Stocks in the home-building sector rose 4 percent, while financial stocks rose 2.5 percent.
• Lobbyists believe that stability in the housing and banking industries is crucial for an economic rebound.
• The rally has left the Standard & Poor's 500 index up 34.5 percent since March 9.
• Lowe's Cos. reported earnings of $1.83 per share, beating Wall Street's forecasts of $1.60 per share.

Sources:

• James Cox, managing partner at Harris Financial Group
• Linda Duessel, equity market strategist at Federated Investors
• Richard Bove, analyst at Rochdale Securities
• Goldman Sachs