Stocks rally on home sales report as Dow tops 9,000

The powerful rally on Wall Street reached a significant milestone Thursday after the Dow Jones industrial average pulled its chin over the 9,000 mark for the first time since January.

A better-than-expected report of a 3.6% rise in existing home sales in June from the National Association of Realtors Thursday is just the latest sign telling investors that the economy's worst may be over.

And now that more than a third of the companies in the Standard & Poor's 500 have reported earnings, the results are coming in better than expected and giving investors hope.

As a result, the Dow Jones industrial average jumped 188.03 points, or 2.1%, to 9,069.29. That pushes the Dow up 3.3% this year so far. Other major stock market indexes are faring even better. The Standard & Poor's 500 rose 22.22, or 2.3%, to 976.29, for an 8.1% gain this year. And the Nasdaq composite index gained 47.22, or 2.5%, to 1,973.60 for a head-turning 25% gain for the year.

"Look at this green. The sea of green," says Joseph Saluzzi, trader at Themis Trading. "It's almost like someone waved a magic wand and everything is OK."

The Dow's gain was the latest jump — and not even the biggest — in a surge that has lifted the index 923 points, or 11%, in only nine days as hopes grow about an economic recovery.

The big question, though, is whether the market's recent tear is just a brief rally sparked by over optimism that quickly fades if there's any sign of economic weakness. Such failed upturns in stocks can be somewhat common and are often called bear market rallies.

Saluzzi says that the economy's main problems, including high unemployment, housing market woes and toxic bank assets, are still major problems facing the system. But right now, investors don't care. "I'll give you a zillion negatives. But right now, they don't matter. It's all momentum," he says.

Several better-than-expected earnings reports also helped boost investor sentiment. Ford F surprised the market with a second-quarter profit of $2.3 billion due mainly to a huge gain for debt reduction, while drugmaker Wyeth WYE, cigarette maker Philip Morris PM and candy maker Hershey HSY all raised profit forecasts for the year.

UPS UPS, however, said its second-quarter profit plunged 49% as sales tumbled.

In another economic report Thursday, the government said new claims for unemployment benefits rose more than expected last week, though the report was distorted again by the timing of auto plant shutdowns.

A wave of merger-and-acquisition activity also gave investor confidence a boost early Thursday. Bristol-Myers Squibb BMY said late Wednesday that it is buying Medarex for about $2.1 billion in cash, latest in a string of acquisitions by the drugmaker.

The company said it will pay $16 a share for Medarex — a 90% premium over Medarex's closing share price Wednesday.

Meanwhile, AMZN agreed to buy, a privately held online shoe store, in a deal worth about $850 million.

Microsoft MSFT and American Express AXP are among those that report earnings after the market closes.

Bond prices tumbled, pushing their yields higher, as money flowed back into the stock market and out of safe-haven investments. The yield on the benchmark 10-year Treasury note, which is closely tied to home mortgage rates, jumped to 3.69% from 3.55% late Wednesday.

The dollar mostly fell against other major currencies, while gold prices dipped.

Oil prices rose $1.76 to settle at $67.16 a barrel on the New York Mercantile Exchange.

The Russell 2000 index of smaller companies gained 17.15, or 3.2%, to 545.85.

The gains in U.S. stocks pushed markets overseas sharply higher. Britain's FTSE 100 rose 1.5%, while Germany's DAX index jumped 2.5% and France's CAC-40 rose 2.1%. In Japan, where markets closed before U.S. stocks began trading, the Nikkei stock average rose 0.7%.

Contributing: Associated Press