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Stocks surge; S&P 500 turns positive for 2009

(Agencies)
Updated: 2009-05-05 11:28

NEW YORK -- The Standard & Poor's 500 index is up for the year. And for once, it was the housing market that sent stocks soaring.

Traders work on the floor of the New York Stock Exchange at the post that handles Citigroup Monday, May 4, 2009. [Agencies]

The S&P 500, considered Wall Street's most important indicator, bounded up 3.4 percent Monday and erased the last of its losses for 2009. And the Dow Jones industrials shot up more than 200 points and had their first finish above 8,400 since Jan. 13.

Two months ago, a S&P 500 in positive ground would have seemed impossible, with the stock market having fallen to 12-year lows on fears of a worsening recession. Monday's rally was led by the same financial and housing stocks that were decimated by the credit crisis and the sinking economy, and it added more momentum to a stunning rally that began March 10.

A double dose of good housing news ignited the advance: Pending US home sales rose more than forecast and had their second straight monthly gain, while construction spending rose unexpectedly in March after five straight declines.

With Monday's gain, the S&P has soared 34.1 percent in the 39 trading days since the rally began, its steepest gain over that many days since 1933. The Dow, meanwhile, is up 28.7 percent.

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Investors are betting that a stream of slowly improving data since early March mean that the economy, and Wall Street itself, have found a bottom. As they've kept buying, they've also overlooked reports, including millions of lost jobs, that point to continuing economic weakness.

Still, as dramatic as the rally has been, no one is describing the market as euphoric, and analysts are warning that Wall Street might not be able to sustain its advance. Monday's gain came on moderate trading volume, a sign that some investors are still cautious.

"The bear market may not be over," said David Kotok, chairman and chief investment officer of Cumberland Advisors. He pointed out that the real estate market is still weakening and banks are still taking losses on loans.

"We have the makings of a 'V' or the first half of a 'W,' " Kotok said, referring to the shape of the stock market's path. "The upward leg looks the same ... Only time will tell."

The S&P 500, the market barometer preferred by professional investors, is now up 0.4 percent for 2009. That matters not only for market watchers -- many investments including mutual funds either mirror or are measured against the index. The Dow is still down 4 percent for the year.

The S&P 500 index rose 29.72 Monday to 907.24, its first close above 900 since Jan. 8. It had shown a gain for the year only during the first five trading days of January, before the market began a huge drop that carried the S&P 500 and the Dow to their lowest levels since 1997.

The Dow rose 214.33, or 2.6 percent, to 8,426.74.

The Nasdaq composite index rose 44.36, or 2.6 percent, to 1,763.56. The Nasdaq, with a big representation of high-tech and smaller company stocks, has run ahead of the other indexes, and is up 11.8 percent in 2009.

The rally came after the National Association of Realtors said its index of pending sales for previously occupied homes rose 3.2 percent to 84.6. That was well ahead of the 82.1 economists had been expecting and the second month of gains after the index hit a record low in January.

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