Investors halted the stock market's three-day losing streak Monday, buying on a range of factors including the weaker dollar and better-than-expected home sales numbers.
Major stock indexes soared more than 1 percent in midday trading, including the Dow Jones industrials, which rose about 134 points.
The National Association of Realtors' report showing a big jump in October home sales revived investors' optimism after disappointing data on the housing industry last week raised concerns about the strength of the economic recovery.
And another drop in the dollar pushed prices for gold, oil and other commodities higher, boosting energy and material stocks. A weaker dollar makes commodities cheaper for foreign buyers, and in turn lifts profits for the companies that produce them.
Bond prices retreated as investors regained their appetite for risk.
The dollar slumped as James Bullard, president of the
Federal Reserve Bank in St. Louis, said the central bank should continue to buy mortgage-backed securities after the program is supposed to expire in March. That would continue to keep interest rates low.
Low interest rates and a resulting decline in the dollar have been big drivers behind the stock market's eight-month rally. Low interest rates enable investors to borrow cheaply and buy assets like stocks and commodities that have the potential to earn higher yields than cash.
Investors were buying Monday on somewhat contradictory forces in the market. The strength in housing could argue in favor of rising rates, while the dollar's weakness pointed to rates remaining low. What is likely happening is that investors who still have plenty of available cash are primed to buy, and so the market is rising on its own momentum.
Analysts say investors will continue to look for dips in the rally as a way to get into the market, not wanting to end the year without participating in some of the big gains stocks have made this year.
"Bearish managers are sweating bullets that they're not going to be able to get that cash in the market and they need to do that," said Phil Orlando, chief equity market strategist at Federated Investors. "That is why any pullback we've seen this year has been met with a wave of cash that has pushed stocks up higher."
At the same time, many portfolio managers have cooled their buying, not wanting to risk losing the big returns they've made since stocks began rallying in March.
Those opposing forces are likely to result in choppy trading over the next few weeks, analysts said, which will be exacerbated by light volume as the holidays approach.
The Dow Jones industrial average rose 134.07, or 1.3 percent, to 10,452.23. The Standard & Poor's 500 index rose 15.99, or 1.5 percent, to 1,107.37, while the Nasdaq composite index rose 30.34, or 1.4 percent, to 2,176.38.
