Strong housing and earnings reports helped stocks rebound Tuesday, a day after the market’s biggest sell-off in five months. Home construction topped the 1 million annual rate last month, the highest level since June 2008. There was also further evidence that inflation remains in check. And gold halted its dizzying tumble.
Apartments propel housing starts
U.S. homebuilders broke the 1 million mark in March for the first time since June 2008. The gain signals continued strength for the housing recovery at the start of the spring buying season.
The overall pace of homes started rose 7 percent from February to March to a seasonally adjusted annual rate of 1.04 million, the Commerce Department said Tuesday.
Apartment construction, which tends to fluctuate sharply from month to month, led the surge: It jumped nearly 31 percent to an annual rate of 417,000, the fastest pace since January 2006.
By contrast, single-family home building, which makes up nearly two-thirds of the market, fell 4.8 percent to an annual rate of 619,000. That was down from February’s pace of 650,000, the fastest since May 2008. The government said February’s pace was a sharp 5.2 percent higher than it had previously estimated.
Housing construction fell 5.8 percent in the Northeast but gained in the rest of the country, led by a 10.9 percent rise in the South. It rose 9.6 percent in the Midwest and 2.7 percent in the West.
Consumer prices decline
U.S. consumer prices declined last month as the cost of gas fell sharply and food prices were unchanged. The tame reading is the latest evidence that the sluggish economy is keeping inflation in check.
The consumer price index declined a seasonally adjusted 0.2 percent in March, after jumping 0.7 percent in February, the Labor Department said Tuesday. Gas prices fell 4.4 percent, reversing part of February’s 9.1 percent gain.
The drop “marks the start of what will likely turn out to be a string of declines stretching into the summer,” Paul Ashworth, an economist at Capital Economics, said in a note to clients.
Wholesale gas prices and crude oil have continued to fall in April. Ashworth noted that usually prices increase in the spring ahead of the summer driving season.
Except for February’s large increase, consumer prices have declined or been unchanged in four of the past five months. In the past year, consumer prices have risen 1.5 percent.
Tame inflation leaves consumers with more money to spend, which spurs more economic growth.
Wall Street rebounds
The Dow Jones industrial average rose 157.58 points, or 1.1 percent, on Tuesday, to 14,756.78, winning back more than half of the 265 points it lost a day earlier. The Standard & Poor's 500 index logged its second-best day of the year.
A three-month run-up was interrupted Monday when stocks had their biggest decline since November. Worries about an economic slowdown in China led to a drop in prices for oil, copper, and other commodities, causing mining and energy stocks to fall. The rally had already slowed earlier this month after reports of weak hiring and retail sales suggested that the economy was cooling off.
Gold, which was at the epicenter of Monday’s sell-off, rose $26.30 to $1,387.40 an ounce, a gain of 1.9 percent.
The precious metal logged its steepest fall in 30 years Monday, plunging $140 an ounce, or 9 percent. Gold had been drifting lower since the start of the year and the decline accelerated Friday after the drop in inflation. People often buy gold when they're fearful of rising prices and sell it when they see inflation ebbing.
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