(Source: Business Week)
U.S. stocks closed sharply higher Monday, sending the S&P 500 index above the 900 level and driving the market further above the bear-market lows of early March. Data showing increases in construction spending and pending home sales provided fuel for Monday's rally, offering fresh signs to investors that the economy is stabilizing.
On Monday, the 30-stock Dow Jones industrial average finished higher by 214.33 points, or 2.61%, at 8,426.74. The broader S&P 500 index gained 29.72 points, or 3.39%, to 907.24. The tech-heavy Nasdaq composite index added 44.36 points, or 2.58%, to 1,763.56. Leading the market higher were financial, basic material, energy, and consumer issues.
Bonds eased. The dollar was mixed. Gold and energy futures climbed.
Market observers said a number of investors who had not taken part in recent rallies were inspired to do so Monday, notes S&P MarketScope.
Traders were awaiting the Fed's bank stress test results on Thursday and the nonfarm payroll report on Friday, which was expected to show the U.S. economy lost 560,000 jobs in April after a drop of 663,000 the month before.
Indexes had briefly pared gains after Obama loosely outlined proposed tax code changes in his budget that would close tax loopholes for corporations and individuals, mainly on overseas expense deductions, in addition to moves to shine some light and transparency on tax havens overseas with the cooperation of authorities there. He was joined in the planned press conference by Treasury Secretary Timothy Geithner.
"The issue is being pitched as one of 'fairness,' but any changes may be phased in two years hence given the stress on corporate balance sheets in the current recession, notes Action Economics. Some $210 billion in loopholes may be closed with increased IRS enforcement, while $75 billion in tax credits for domestic R&D will be given permanent status under the plan for a net $135 billion to the Federal bottom line.
In economic news Monday, U.S. construction spending rose 0.3% in March. It was much stronger than the 1.7% drop that markets had expected, after a downwardly revised 1.0% drop in February [-0.9% before]. The increase in March breaks a string of five consecutive monthly declines. Residential spending fell another 4.1% after dropping 5.9% in February and down for the seventh consecutive month. Residential spending is down 33% from a year ago. Nonresidential spending rose 2.0%, after a 0.9% increase in February [previously 0.5%]. Nonresidential construction is up 1.7% over last year. Public construction spending was up 1.1% in March, and is up 7% over last year.
