Stocks jump as home sales, construction increase

Investors are rushing into stocks Monday as surprise increases in pending home sales and construction spending offered the latest signs that the economy is stabilizing. Stocks surged about 2 percent, including the Dow Jones industrial average, which jumped 175 points. Investors have been more upbeat about prospects for the economy in the last two months and Monday's reports bolstered the case that the economy's slide could be slowing. Two new economic nuggets bolstered the case for stocks. Construction spending rose unexpectedly in March after five straight declines, and pending U.S. home sales rose more than expected. The Commerce Department said construction spending rose 0.3 percent, the best showing since a similar rise last September. Economists surveyed by Thomson Reuters had expected spending to drop 1.5 percent. Separately, the National Association of Realtors said its index of pending sales for previously occupied homes rose 3.2 percent to 84.6 on strength in nonresidential projects and government building. The report was well ahead of the 82.1 economists had been expecting. In midmorning trading, the Dow Jones industrial average rose 173.31, or 2.1 percent, to 8,385.72. The blue chips had been up about 100 ahead of the reports. The Standard & Poor's 500 index rose 18.16, or 2.1 percent, to 895.68, and the Nasdaq composite index rose 30.25, or 1.8 percent, to 1,749.45. The market's enthusiasm will be put to several tests this week including the April employment report, one of the most closely watched economic indicators, which comes out on Friday. But of the greatest concern for the market is the release upcoming Thursday of the government's "stress tests" of the 19 largest U.S. banks. If the results trigger renewed anxiety about the state of the U.S. financial system that could easily upend the market's powerful two-month advance, which has sent the Standard & Poor's 500 index up 29.7 percent since March 9.