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S&P 500 surges on housing starts, jobless claims

Positive economic news helped push stock prices sharply higher Thursday.

The Dow Jones Industrial Average rose 84.79 points to 13,596.02, its sixth gain in the last seven sessions. The Nasdaq Composite Index was up 18.46 points to 3,136.00 and the S&P 500 Stock Index gained 8.31 points to 1,480.94.

The Department of Labor reported initial claims for jobless benefits fell sharply in the past week, down by 37,000 to 335,000, the lowest level since January 2008. Also, new home construction activity rose by 12.1 percent in December, the biggest increase in four years.

Oil prices rose on tensions in Algeria, up $1.25 to $95.49 a barrel. Gold also moved higher, up $7.60 to $1,690.80 an ounce.

Builders started work on homes in December at the fastest pace since the summer of 2008, the Commerce Department said Thursday. Homebuilder stocks rose broadly following the report. The S&P 500's homebuilding index climbed 3.8 percent, its biggest gain in almost a month. PulteGroup Inc. (NYSE: PHM) led the advance with a jump of $1.03, or 5.3 percent, to $20.37.

The reports helped offset disappointment over the fourth-quarter earnings reports of two of the nation's biggest banks, Citigroup Inc. (NYSE: C) and Bank of America Corp. (NYSE: BAC), said JJ Kinahan, chief derivatives strategist at TD Ameritrade (NYSE: AMTD).

“The financial stocks are having a tough time impressing the Street with anything,” Kinahan said. “The traditional banks are getting squeezed on margins and the expectations for a lot of those companies had already been set low.”

Citigroup fell $1.24, or 2.9 percent, to $41.24 after its income fell well short of Wall Street's expectations. The bank's legal expenses rose and it released less money from its loan-loss reserves.

Bank of America dropped 50 cents, or 4.2 percent, to $11.28 after its earnings declined. The bank is continuing to work on clearing up old problems at its mortgage unit. The bank made $367 million in the last three months of 2012 after paying preferred dividends, down sharply from $1.6 billion in the same period a year ago.

Kim Caughey Forrest, a senior analyst at Fort Pitt Capital Group, said it was too early to conclude that the housing market had turned the corner. She noted that a large “shadow inventory” of houses that still need to be foreclosed on may weigh on house prices in the coming months.

“This rally is probably a little bit too optimistic for the information that we got,” Caughey Forrest said. “There's some conflicting information here and the market has just decided to overlook the negative thing.”

The indexes powered higher even as more discouraging news about manufacturing came out. The Philadelphia branch of the Federal Reserve reported that manufacturing contracted this month in the mid-Atlantic region. On Tuesday, the Fed's New York branch reported that manufacturing in its own district was worsening.

Stocks started 2013 with a rally after lawmakers came up with a last-minute plan to stop the U.S. going over the “fiscal cliff,” a series of tax hikes and spending cuts that economists say would probably have pushed the U.S. into recession.

The Dow and the S&P 500 are both up 3.8 percent since the start of January.

The yield on the 10-year Treasury note, which moves inversely to its price, rose four basis points to 1.88 percent.

Ebay Inc. (Nasdaq: EBAY) rose $1.27, or 2.4 percent, to $54.17 after reporting fourth-quarter earnings that exceeded analysts' expectations. Bargain-hunting holiday shoppers flocked to eBay's online shopping mall and digital payment service, PayPal Inc.

CBS Corp. (NYSE: CBS) surged $3.01, or 7.9 percent, to $40.95 after the media company said late Wednesday that it was converting its U.S. outdoor advertising business to a real estate investment trust and selling the international portion of the business. Deutsche Bank (NYSE: DB) analysts lifted their target price on the stock to $47 from $40, saying the conversion to a REIT “meaningfully enhances value.”

BlackRock Inc. (NYSE: BLK) gained $9.76, or 4.4 percent, to $232 after the investment manager said its fourth-quarter net income surged, beating analysts' forecasts. The company also increased its dividend and said it may buy back more stock.


The Associated Press contributed to this report.


Related Links:
New York Stock Exchange: www.nyse.com
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