Home builders, retailers lead market to gains

NEW YORK - Investors rushed back into stocks yesterday as profits at a handful of companies indicated the economy might be gaining strength.

Gains in home builders, retailers, and other consumer discretionary stocks led the market sharply higher. The Dow Jones industrial average surged 172 points after four sessions of losses. Government bond prices jumped after an auction drew strong demand.

Traders focused on several better-than-expected earnings reports and welcomed news that the Federal Reserve took the first step toward removing the numerous emergency-lending programs it launched last fall at the height of the financial crisis.

The third successful Treasury auction of the week helped boost confidence that Washington will be able to raise enough money to fund the economic recovery.

Shares of home builders rallied after Lennar Corp. said orders for new homes rose 63 percent during the second quarter and posted revenue that beat expectations.

Retailers and other consumer-discretionary stocks jumped after an upbeat report from Bed Bath & Beyond Inc. The home-furnishings store said its fiscal first-quarter profit climbed 14 percent as sales rose after the liquidation of rival Linens 'n Things Inc.

Joe Saluzzi, co-head of equity trading at Themis Trading L.L.C., said some of the day's gains likely reflected portfolio managers' buying up stocks to pump up their returns ahead of the end of the second quarter Tuesday.

"I think the window dressing is a big deal," he said. "There's just a force underneath the market that wants to keep it higher."

The Dow rose 172.54, or 2.08 percent, to 8,472.40, after falling 40 points in the early going. The broader Standard & Poor's 500 index rose 19.32, or 2.14 percent, to 920.26, and the Nasdaq composite index rose 37.20, or 2.08 percent, to 1,829.54.

Uncertainty about when the economy will turn around and how much it might eventually grow have made for a rocky market this month. The Dow Jones industrial average remains up 29.4 percent from its 12-year low hit on March 9, but is down nearly 330 points, or 3.7 percent, from the five-month high it reached June 12.

The yield on the benchmark 10-year Treasury note, which moves opposite its price, tumbled to 3.53 percent from 3.69 percent late Wednesday.

More than four stocks rose for every one that fell on the New York Stock Exchange, where volume was 1.2 billion shares, up from 1.1 billion shares Wednesday.