Markets Near Milestone Highs as Federal Reserve Reassures on Rates

The Dow Jones industrial average came within 100 points of a milestone high on Wednesday after rising sharply for a second consecutive day.

The market surged in response to more evidence that the Federal Reserve will keep interest rates low, that housing will continue recovering and that shoppers are not cutting back on spending, even with a payroll tax increase.

All but one of the 30 stocks in the Dow Jones industrial average rose, as did all 10 industries in the Standard Poor’s 500-stock index.

The Dow rose 175.24 points, or 1.3 percent, to 14,075.37. The index is now less than 100 points away from its close of 14,164 in October 2007. It has gained 291 points in the last two days, erasing its decline of 216 points on Monday, when inconclusive results from an election in Italy renewed worries that Europe’s fiscal crisis could flare up again.

“The market psychology has clearly shifted. It’s no longer sell the rally; it’s buy the dips,” said Dan Veru, chief investment officer at Palisade Capital Management. “The economic data continues to be strong.”

Stocks have surged, with the Dow up 7.4 percent since the start of the year. Earnings for S. P. 500 companies are set to climb 7.8 percent in the fourth quarter, the third consecutive quarter of growth, according to data from SP Capital IQ.

The S. P. 500-stock index gained 19.05 points, or 1.3 percent, to 1,515.99 on Wednesday. It is 6.3 percent higher for the year and about 3.2 percent short of its nominal record close of 1,565. The Nasdaq composite index rose 32.61 points, or 1.04 percent, to 3,162.26.

Investors were encouraged that the Federal Reserve chairman, Ben S. Bernanke, stood behind the central bank’s low-interest-rate policies as he faced lawmakers for a second day. His comments eased worries about the bank’s resolve to continue the program. Those worries sprang up last week when minutes from the bank’s last policy meeting revealed disagreement about the policy among Fed officials.

Interest rates were steady. The Treasury’s benchmark 10-year note fell 4/32, to 100 29/32, and the yield rose to 1.90 percent from 1.89 percent late Tuesday.

The number of Americans who signed contracts to buy homes rose in January to the highest level in almost three years. The report continued a string of positive housing news, including the government’s announcement on Tuesday that sales of new homes rose 16 percent last month to the highest level since July 2008.

Home builder stocks rose for the second consecutive day. The PulteGroup climbed 25 cents, or 1.3 percent, to $19.30, after rising 5.7 percent the day before.

“Some encouraging news for the bulls has been the housing data that has come out over the past couple of days,” said Todd Salamone, director of research at Schaeffer’s Investment Research.

Mr. Salamone said he remained “extremely bullish” on stocks in the medium and long term, but cautioned that there might be a pullback in the coming days.

Discount retailers rose on Wednesday. Dollar Tree jumped $4.31, or 10.5 percent, to $45.39 after reporting a profit increase of more than 20 percent. Dollar General rose $1.61, or 3.6 percent, to $46.56. Family Dollar Stores rose $1.39, or 2.5 percent, to $57.68.

Priceline.com gained $17.42, or 2.6 percent, to $695.91 after reporting that its net income grew in the fourth quarter on increased bookings.

First Solar fell $4.32, or 13.8 percent, to $27.04 after the company posted disappointing sales for the fourth quarter and gave a weak early outlook for the year.

Target, the discount retail chain, fell 93 cents, or 1.5 percent, to $63.12. The company reported that its quarterly income fell 2 percent as it dealt with intense competition during the holiday shopping season.

DreamWorks Animation fell 30 cents, or 1.8 percent, to $16.31 after posting a loss of $82.7 million. The company booked a write-off on its November release, “Rise of the Guardians,” and on a coming movie that needs to be reworked.

Article source: http://www.nytimes.com/2013/02/28/business/daily-stock-market-activity.html?partner=rss&emc=rss