Slightly better news from the housing sector, strong results from drugmaker Merck and speculation over what an economic stimulus plan will look like all helped to push stocks higher Tuesday.
The Dow Jones industrial average snapped a three day losing streak to gain 141.53 points, or 1.8%, to 8078.36. Despite the day’s gain, though, the Dow remains down 8.0% this year.
Lifted by gains of stocks in the motorcycle manufacturing, home building and personal products industries, the Standard & Poor’s 500 index rose 13.07 points, or 1.6%, to 838.51. The S&P 500 is down 7.2% in 2009.
Tech stocks also participated in the day’s bounce, with the Nasdaq composite index rising 21.87 points, or 1.5%, to 1516.30. The Nasdaq is down 3.9% this year, the least amount among the major stock market indexes.
The market’s ups and downs make investors just as worried to sell and miss out as they are to hold on and stand to lose more. “Investors are getting more gut checks than with the worst jar of peanut butter,” says David Sowerby of Loomis Sayles.
There was at least some news for the bulls to hang onto. Pending sales of existing homes rose 6.3% in December, giving a boost to the struggling home building industry group.
Meanwhile, an alternative plan being discussed in Washington to stimulate the economy, in the form of deep tax cuts, also gave traders “some optimism,” says Todd Clark of Nollenberger Capital.
Still, investors aren’t convinced the economy is healing just yet and market ups are to be expected after bouts of selling, says Richard Cripps of Stifel Nicolaus. Trading volume, or the level of buying and selling, remains light, indicating major players are still on the sidelines, he says.
“The market is still in wait and see mode,” Cripps says.
Highlights: Home builders rallied. KB Home rose $1.18 to $12.28, Toll Bros. gained $1.08 to $18.06, and Pulte Homes added 68 cents to $10.92 on the news of better pending home sales.
*Merck gained $1.81 to $30.24 after the drugmaker said it earned $1.6 billion, or 78 cents a share, during the quarter. That reversed a loss in the same quarter a year ago and topped estimates by 18%.
*Citigroup fell 19 cents, or 5.2%, to $3.46 on continuing uncertainly about what form a stimulus and banking rescue plan will take.