NEW YORK (AP) — A weaker dollar and better-than-expected data on the housing market sent investors moving back into stocks Monday after a three-day losing streak.
Major stock indexes soared more than 1.5 percent in early trading, including the Dow Jones industrials, which rose about 170 points.
A report showing a big jump in home sales reinvigorated investors after disappointing reports on the housing industry last week brought concerns about the strength of the recovery.
The National Association of Realtors said home sales rose 10.1 percent in October to the highest level in two and a half years, spurred by a tax credit for first-time homebuyers. Analysts had been expecting a 1.4 percent increase. The credit, which was due to end at the end of the month, was subsequently extended into 2010.
Stocks had been rising sharply prior to the report on the back of a weaker dollar. The falling dollar pushed prices for gold, oil and other commodities higher, boosting energy and material stocks. A weaker dollar makes commodities cheaper for foreign buyers. Bond prices fell slightly as investors stepped up their appetite for risk.
The dollar retreated as Federal Reserve official James Bullard said the central bank should continue to buy mortgage-backed securities after the program is supposed to expire in March. That would continue to keep interest rates low.
Low interest rates and a resulting decline in the dollar have been big drivers behind the stock market’s eight-month rally. Low interest rates enable investors to borrow cheaply and buy assets like stocks and commodities that have the potential to earn higher yields than cash.
Stocks fell late last week on worries about the strength of the economy, boosting safe-haven assets like the dollar. Analysts say investors will continue to look for dips in the rally as a way to get into the market, not wanting to end the year without participating in some of the big gains stocks have made this year.
The Dow Jones industrial average rose 172.16, or 1.7 percent, to 10,490.32. The Standard & Poor’s 500 index rose 20.25, or 1.9 percent, to 1,111.63, while the Nasdaq composite index rose 41.14, or 1.9 percent, to 2,187.18.
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