Global stocks rally on U.S. home sales data, yen falls

By Herbert Lash

NEW YORK (BestGrowthStock) – U.S. stocks (Read more about the stock market today. ) rallied more than 2 percent on Wednesday as energy shares rebounded one day after a steep sell-off, while the yen fell after the resignation of Japanese Prime Minister Yukio Hatoyama raised concerns about the outlook for the currency.

Surprisingly strong U.S. housing data for April drove optimism about the economy, also boosting stocks and driving up oil prices. The stock rally also eased concerns that Europe’s sovereign debt crisis could restrain a fragile economic recovery.

U.S. government debt prices slid as rising stocks offered a semblance of stability for jittery investors and curbed the appetite for safe-haven bonds.

Pending sales of previously owned U.S. homes topped expectations in April to hit a six-month high, according to an industry survey, sparking investors to snap up shares that tumbled during Tuesday’s sell-off.

Investors seized on the housing data as a reason to get back into equities, which were down about 12 percent from a recent peak in April.

“The fact that the market is reacting to a data point that some people feel deserves a pretty big footnote is indicative of a market that does seem to be skewed to the oversold side,” said Craig Peckham, equity trading strategist at Jefferies & Co in New York.

The Dow Jones industrial average (.DJI: ) closed up 225.52 points, or 2.25 percent, at 10,249.54. The Standard & Poor’s 500 Index (.SPX: ) rose 27.67 points, or 2.58 percent, at 1,098.38. The Nasdaq Composite Index (.IXIC: ) gained 58.74 points, or 2.64 percent, at 2,281.07

“This is a bit of a relief recovery after yesterday and the strongest symptom of that is the action we’re observing in the energy sector,” said Lawrence Creatura, portfolio manager at Federated Clover Investment Advisors in Rochester, New York.

The S&P energy index (.GSPE: ) gained 4.3 percent. Shares of Halliburton rose 12 percent after executives said the offshore oil industry had plenty of work even as the Obama administration imposed a six-month moratorium on deep-water drilling.

Major automakers posted double-digit U.S. sales gains in May from depressed levels a year earlier, including Ford Motor Co (F.N: ), which rose 3.9 percent to $11.85.

The National Association of Realtors said its Pending Home Sales Index, based on sales contracts signed in April, increased 6.0 percent, to 110.9, as prospective home owners took advantage of a popular home buyer tax credit ahead of its expiration on April 30.

Analysts polled by Reuters had forecast pending home sales would rise 5.0 percent.

But falling demand for home loans pointed to ebbing activity in the vital housing market due to the expiration of a popular tax credit for buyers.

MSCI’s all-country world equity index (.MIWD00000PUS: ) pared earlier losses to rise 1 percent.

The yen hit a two-week low against the U.S. dollar after Hatoyama and his deputy resigned to try to boost the ruling party’s faltering fortunes in an election next month.

Hatoyama’s expected replacement, Finance Minister Naoto Kan, earlier this year said he wanted the yen to weaken more and that most businesses favored a dollar/yen rate around 95 yen. Since then he has mostly toed the Finance Ministry line that stable currencies are desirable and markets should set foreign exchange levels.

“Kan is a noted dove who has been an aggressive proponent of a lower yen in order to help stimulate Japanese exports,” said Boris Schlossberg, a director of currency research at GFT, in New York.

The dollar was up 1.2 percent at 92.12 against the yen Against a basket of major currencies, the U.S. Dollar Index (.DXY: ) up 0.15 percent at 86.722.

The euro was up 0.10 percent at $1.2237, paring earlier losses.

European Central Bank board member Christian Noyer was cited as saying the single currency’s exchange rate against the greenback was around a 10-year average and “by no means an unusually low level.

Gold slipped as some investors cashed in on the previous session’s run to a two-week high and as risk aversion dissipated upon release of the U.S. housing data.

U.S. gold futures for August delivery on the COMEX division of the New York Mercantile Exchange lost $4.30 to settle at $1,222.60 an ounce.

U.S. crude for July settled up 28 cents a barrel, or 0.4 percent, to $72.86, after losing nearly 2 percent on Tuesday. Oil had risen as high as $73.93 a barrel, but pared some gains by afternoon settlement.

Europe’s ICE Brent settled up $1.04 a barrel to $73.75.

“The pending home sales helped the stock market and oil,” said Richard Ilczyszyn, senior market strategist at Lind-Waldock in Chicago.

The benchmark 10-year U.S. Treasury note was down 21/32 in price to yield 3.34 percent.

The MSCI index of Asia Pacific stocks outside Japan (.MIAPJ0000PUS: ) fell 0.6 percent. Japan’s Nikkei stock average (.N225: ) fell nearly 1 percent, surrendering some early gains.

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(Reporting by Joshua Schneyer, Nick Olivari, Vivianne Rodrigues, Richard Leong in London; Ian Chua, Emma Farge, Harpreet Bhal in London; Writing by Herbert Lash; Editing by Leslie Adler)

Global stocks rally on U.S. home sales data, yen falls