Stocks rally on better than expected economic reports

NEW YORK -- Stocks rallied Wednesday after Wall Street got some signs that its gloomy forecast for the economy might be overdone.

The government reported that February brought unexpected increases in demand for big-ticket manufactured goods and sales of new homes. Economists had expected both readings would add to an extended slump.

"Given the enormous level of pessimism, the hurdle is as low as a limbo stick," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "Relative to expectations, this is fantastic news."

Economists' expectations have been so grim that surprising reports on retail sales, housing starts and inflation have helped propel a two-week rally in stocks after the numbers weren't as bad as feared.

In late morning trading, the Dow was up 151.25, or 2%, to 7,811.22. The Dow fell nearly 116 points on Tuesday and surged almost 500 on Monday.

Broader stock indicators also rose. The Standard & Poor's 500 index was up 15.05, or 1.9%, to 821.30, and the Nasdaq composite index was up 29.99, or 2%, to 1,546.51.

More than six stocks rose for every one that fell on the New York Stock Exchange, where volume came to 388.9 million shares.

Bond prices fell. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 2.73% from 2.71% late Tuesday. The yield on the three-month T-bill, considered one of the safest investments, rose to 0.20% from 0.17% Tuesday.

The dollar was mixed against other major currencies, while gold prices fell.

Oil fell $1.10 to $52.88 a barrel on the New York Mercantile Exchange.

Overseas, Japan's Nikkei stock average slipped 0.1%. In afternoon trading, Britain's FTSE 100 rose 0.6%, Germany's DAX index rose 1.5%, and France's CAC-40 rose 1.2%.