Stocks extend gains after home sales report

NEW YORK -- The Dow Jones industrials are back above 9,000 for the first time since the beginning of January.

Thursday's report of a jump in home sales last month eased investors' worries about one of the economy's biggest trouble spots. They responded by buying stocks across the market, lifting major stock indexes almost 2% or more and sending the Dow past 9,000.

A real estate group said sales of previously occupied homes rose 3.6% from May to June. It was the third straight monthly increase and fed investors' hopes that the overall economy is strengthening.

A weak housing market and rising unemployment are widely seen as two of the biggest obstacles to a recovery in the economy. The National Association of Realtors said sales came in at 4.89 million last month, above the 4.84 million analysts had been expecting.

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

Overseas, Hong Kong's Hang Seng index surged 3%. The Hang Seng now stands at its highest level since September 10, outpacing the recovery in U.S. markets. Earlier this week, the Dow Jones industrials hit their highest point since January, while the benchmark Standard & Poor's 500 index reached its highest level since November.

Japan's Nikkei stock average rose 0.7%. In afternoon trading, Britain's FTSE 100 was down 0.1%, Germany's DAX index rose 0.04%, and France's CAC-40 was down 0.4%.

After a week-long rally that pushed the major indexes up more than 8%, investors have been hesitant to make big moves the past two days amid a mixed batch of earnings reports.

Many companies continue to report profits that are better than expected, and some are even giving improved outlooks on the remainder of the year. But the bar had been set low to begin with, and analysts warn that as earnings season progresses, the expectations tend to increase.

Meanwhile, sales at many companies are still sagging, a clear sign that consumers and businesses would rather save than spend.

Xerox XRX said cost cutting helped offset weak sales. Its second-quarter profit fell 35%, but still beat Wall Street's estimates.

And Hershey said its quarterly profit leapt 72% thanks to a price hike and a new advertising effort.

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

Bond prices inched higher in early trading. The yield on the benchmark 10-year Treasury note, which moves opposite its price, dipped to 3.53% from 3.55% late Wednesday.

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

Oil prices fell 52 cents to $64.88 a barrel in electronic trading on the New York Mercantile Exchange.