Stocks jump after consumer confidence level surges
NEW YORK -- Consumers' more upbeat mood is spreading to Wall Street.
Stocks surged Tuesday after the Conference Board said consumer sentiment rose in May to the highest level since September. All the major stock indicators rose more than 2%, including the Dow Jones industrial average, which jumped 200 points.
The research group's Consumer Confidence Index vaulted to 54.9 from 40.8, soaring past the 42.3 that economists surveyed by Thomson Reuters expected.
Investors watch the indicator for signs of whether consumers might start shopping more or making bigger purchases such as cars and homes. Spending by consumers makes up more than two-thirds of U.S. economic activity.
Jim King, chief investment officer at National Penn Investors Trust, said the improvement in consumer confidence surprised investors. With unemployment still high and expected to go higher, many market watchers thought the mood on Main Street would remain gloomy.
"I think the consumer confidence figure is one that no one really pinned a lot of hopes on as going higher," he said.
At the close of trading, the Dow was up 196, or 2.4%, to 8,4773. The Standard & Poor's 500 index rose 23, or 2.6%, to 910, and the technology-laden Nasdaq composite index rose 58, or 3.5%, to 1,750.
Stocks dependent on strong consumer spending jumped. Macy's rose 66 cents, or 5.9%, to $11.85, while Best Buy advanced $2.04, or 5.8%, to $37.22. Home builder KB Home rose 94 cents, or 6.4%, to $15.58.
Gains in home builder stocks came as investors shook off a mostly downbeat reading on the housing market. S&P/Case Shiller reported a 18.7% drop in its March home price index. The decrease was a little bigger than in February, and slightly larger than economists predicted.
Tech stocks showed some of the biggest gains in part after an analyst raised her rating on Apple. She contends the growth of the company's iPhone device has been underestimated. Apple rose $7.31, or 6%, to $129.81.
Investors have been questioning whether the stock market's massive two-month rally can be sustained given the continuing weakness in the global economy. The Dow is still up 26.4% from its 12-year low hit on March 9. Even with those gains, the Dow is still down 41.6% from its peak in October 2007.
