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Stock Markets Recover Some Losses

Published on December 30, 2011 by   ·   No Comments

Better news on home sales and improved prospects for job growth sent stocks higher on Wall Street on Thursday.

The Dow Jones industrial average rose 136 points, nearly making up its 140-point loss from the day before. The Standard & Poor’s 500-stock index edged back into the black for 2011, with just one day of trading left in the year.

The four-week average of unemployment claims fell to a three-and-a-half-year low, an indication that hiring could pick up. Also, the number of Americans who signed contracts to buy homes in November rose more than 7 percent to the highest level in a year and a half, according to the National Association of Realtors.

Quincy Krosby, Prudential Financial’s market strategist, said the reports were encouraging signals for the economy going in to 2012.

“The correlation between jobs and housing has been crystal-clear this year,” Ms. Krosby said. “Parts of the country where jobs are more plentiful are the ones where the housing market has held up.”

She said that the correlation became more pronounced after the real estate bust, when lenders became reluctant to even consider customers for a mortgage unless they held jobs.

For instance, Boston’s 1.1 percent drop in home prices since last year was one of the lowest among metro areas tracked by S.& P./Case-Shiller index. The city’s unemployment rate is 6.2 percent, much lower than the national average of 8.6 percent.

The positive housing news sent the stocks of home builders sharply higher. Masco Corporation rose 8.4 percent and PulteGroup rose 6 percent.

The Dow closed at 12,287.04, a gain of 135.63 points, or 1.1 percent. For the year, the Dow is up 709 points, or 6 percent.

The S.& P. 500 rose 13.38 points, or 1.07 percent, to 1,263.02. That is just six points above where the index started the year.

The Nasdaq composite rose 23.76 points, 0.92 percent, to 2,613.74.

Chesapeake Midstream Partners, a natural gas systems operator, rose 5 percent after it agreed to acquire Chesapeake Energy’s pipeline business.

Sears Holdings fell 1 percent two days after it said it was closing over 100 stores nationwide.

The euro fell to its lowest level against the dollar in more than a year and its lowest against the Japanese yen in a decade. The euro went as low as $1.28 versus the dollar, its weakest since September 2010.

Investors continued to be worried that Italy’s 10-year borrowing rate remained uncomfortably close to 7 percent, a level that economists consider unsustainable. Greece, Ireland and Portugal all had to seek relief from their creditors after their 10-year bond yields rose above 7 percent.

Italy paid 6.98 percent on a 10-year bond auction where it raised $3.3 billion. That was lower than the 7.56 percent it had to pay at an equivalent auction last month, but not low enough to assuage investors.

The Treasury’s 10-year note rose 6/32, to 100 29/32. The yield fell to 1.90 percent, from 1.92 percent late Wednesday.

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