Stocks surge on good economic data from U.S., Europe
The Dow Jones industrial average was recently up 269.43 points, or 2.29%, to 12035.69. The broader Standard & Poor's 500 index was up 2.4%, or 29.01 points, to 1234.24 in early trading.
Stock prices were given a boost by a report from the Commerce Department showing that construction firms started building 685,000 homes in November, the biggest number since 2010 and much more than was anticipated by economists. The number of building permits was also up more than expected. Much of the increase was due to a rise in new apartment buildings for the rental market.
The increase in home-building comes at a time when residential real estate prices have been falling, leading economists to call for care in interpreting the new data.
"Although this is a constructive development, caution still needs to be applied to the potential positive effect this will have on the economy," Mizuho Securities economist Steve Ricchiuto wrote in a note to clients. "Not only has housing become a very small portion of the economy during the last several years of consolidation, but more importantly, the banking industry’s more conservative lending practices strongly suggest growth in this industry will remain muted."
Before the data on U.S. home-building came in, European markets were already rising thanks to a German report showing that business confidence in Europe's largest economy had risen unexpectedly for the second straight month.
Germany's leading stock index was up 2.7%, while a French index was up 2.3% near the market's close there.
The optimism today contrasted with Monday's pessimism, on a day that was dominated by investor concerns about Europe's sovereign debt crisis and new bank regulations.
-- Nathaniel Popper
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