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Stocks advance amid better-than-estimated economic reports

Stock prices rebounded Tuesday as investors reacted to positive news on the housing market and consumer confidence.

The Dow Jones Industrial Average gained 115.96 points to 13,900.13, recovering more than half of Monday’s loss. The Nasdaq Composite Index rose 13.40 points to 3,129.65 and the S&P 500 Stock Index added 9.09 points to 1,496.94.

The Case-Shiller home price index rose 6.8 percent in December compared to the same month a year earlier. Also, the Conference Board reported its consumer confidence index rose in February following three months of declines.

Gold gained $28.90 to $1,615.50 a barrel, its biggest one-day gain so far in 2013. However, oil dropped 48 cents to $92.63 a barrel, the lowest close so far this year.

PulteGroup Inc. (NYSE: PHM) and KB Home (NYSE: KBH) jumped at least 5.7 percent to pace gains among homebuilders. Home Depot Inc. (NYSE: HD) rallied 5.7 percent as it raised its dividend and approved a $17 billion share buyback after profit beat analysts’ estimates. Macy’s Inc. (NYSE: M), the second-largest U.S. department-store chain, gained 2.8 percent after forecasting earnings that beat projections.

“The economic numbers have been holding up really well,” said Brad Sorensen, director of market and sector analysis at San Francisco-based Charles Schwab Corp. (NYSE: SCHW). His firm has $2.01 trillion in client assets. “The home data show that the housing market is rebounding and should continue to contribute to growth. It helps to feed into consumer confidence as well. They’re related. In a time when we see more uncertainty rising, decent economic data helps to calm things down a little bit.”

Federal Reserve Chairman Ben S. Bernanke defended the central bank’s unprecedented asset purchases, saying they are supporting the expansion with little risk of inflation or asset- price bubbles. He spoke Tuesday in prepared testimony to the Senate Banking Committee in Washington.

Automatic federal budget cuts set to begin March 1 will put a “significant” burden on the economy if lawmakers can’t avert the reductions, Bernanke told lawmakers in the first day of his semiannual monetary policy report to Congress. He also urged lawmakers to put the budget on a “sustainable long-run path.”

Bernanke and his colleagues on the Federal Open Market Committee are debating whether to curtail $85 billion in monthly bond-buying amid concern the Fed’s record $3.1 trillion balance sheet may encourage excessive risk-taking by investors and complicate the Fed’s exit from easing. Several participants at the Jan. 29-30 meeting said the Fed should be prepared to vary the pace of purchases as the economic outlook changes, according to minutes released last week.

Apple Inc. (Nasdaq: AAPL) climbed 1.4 percent to $448.97. The company should split its stock 10 for 1 rather than follow a proposal by Greenlight Capital Inc.’s David Einhorn for a new class of dividend-paying preferred stock, Laurence Balter, chief market strategist at Oracle Investment Research, said in a note Tuesday. A stock split would spur a rally in the shares by attracting individual investors willing to buy Apple at a lower price, while Einhorn’s plan would deplete the company’s cash flow, he said.

SanDisk Corp. (Nasdaq: SNDK) gained 2.2 percent to $50.39. The maker of flash memory for mobile devices was raised to outperform, which is the equivalent of buy, at RBC Capital Markets by equity analyst Doug Freedman. The 12-month share-price estimate is $65.

JPMorgan Chase & Co. (NYSE: JPM) lost 0.2 percent to $47.60, after gaining as much as 1.2 percent earlier Tuesday. The biggest U.S. bank plans to reduce headcount by as many as 19,000 people in its mortgage and community banking businesses through 2014 as Chief Executive Officer Jamie Dimon cuts expenses.

Bloomberg News contributed to this report.

Related Links:
New York Stock Exchange: www.nyse.com
Nasdaq Stock Market: www.nasdaq.com

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