Stocks climb as falling dollar boosts commodities

Stocks rise as dollar slides; reports on housing, construction point to improving economy
By Tim Paradis and Ieva M. Augstums, AP Business Writers
On 3:45 pm EST, Tuesday December 1, 2009

NEW YORK (AP) -- The stock market is picking up where it left off before its scare over debt problems in Dubai.

AP - FILE - In this Nov. 27, 2009 file photo, Traders move about the floor of the New York ...
Major stock indicators rose more than 1 percent, including the Dow Jones industrial average, which jumped 120 points to send the Dow above 10,500 for the first time since October last year.
The weakening dollar again boosted stocks, a pattern that has played out for months. The cheaper U.S. currency drove up commodities prices and lifted the stocks of energy and materials companies that produce them.
Analysts said a mostly upbeat array of economic reports and easing worries about the fallout from debt struggles in Dubai gave investors who had jumped out of the market reason to return.
The market's two-day advance leaves the Dow where it was before tumbling Friday on worries that an investment fund in Dubai wouldn't be able to pay its debts and trigger another financial spiral like the one that followed the collapse of Lehman Brothers last year.
Rick Bensignor, chief market strategist at Execution LLC, said the drop in the dollar and a move into riskier assets is a sign that investors who jumped out of stocks or rushed into defensive positions are shedding worries of a wider debt problem from the Middle East.
"The market has essentially shaken it off," he said. "The whole move is as if nothing happened last week."
Economic reports were mixed, but still pointed to a strengthening trend in the economy. The Institute for Supply Management, a trade group, said overall manufacturing activity grew at a slower pace in November but that new orders rose. That signals activity could pick up in the coming months. Its employment measure grew for the second straight month after sliding for more than a year.
The snapshot of U.S. factories followed report from a Chinese industry group that said manufacturing activity grew in November for the ninth consecutive month.
Separately, the National Association of Realtors said its seasonally adjusted index of sales agreements rose in October to the strongest level since March 2006. Economists had expected the index would fall.
The government said construction spending edged higher in October, the first increase in six months.
The reports gave investors new confidence that a nearly nine-month rally in the stock market still has legs thanks to continued signs of expansion in the economy. The Dow jumped 6.5 percent in November, its best monthly gain since July, and it's up 58 percent from a 12-year low in March.
In late afternoon trading, the Dow rose 122.58, or 1.2 percent, to 10,467.42. The Standard & Poor's 500 index gained 12.55, or 1.2 percent, to 1,108.18, while the Nasdaq composite index rose 31.19, or 1.5 percent, to 2,175.79.
The ICE Futures U.S. dollar index, which measures the greenback against a basket of foreign currencies, fell 0.6 percent.
Crude oil rose $1.07 to $78.35 per barrel on the New York Mercantile Exchange. Gold rose.
Bob Froehlich, senior managing director at Hartford Financial Services, said the day's economic news addressed some of investors' biggest worries: employment, housing and China.
"What we're seeing is that we've got two of those three fixed," he said. "There are signs everywhere you look that the worst is behind us."
Froehlich said he expects the nation's unemployment rate, already above 10 percent, will worsen before it begins to improve.
Industrial names rose as commodities advanced after the reports on manufacturing and construction.
Aluminum producer Alcoa Inc. rose 25 cents, or 2 percent, to $12.77. It was one of the biggest gainers among the 30 stocks that make up the Dow industrials.
Freeport-McMoRan Copper & Gold Inc. rose $1.04, or 1.3 percent, to $83.84.
Energy stocks also rose. Schlumberger Ltd., which provides services to oil companies, rose $1.16, or 1.8 percent, to $65.05.
Home builders climbed on the day's economic reports. Beazer Homes USA Inc. advanced 13 cents, or 3 percent, to $4.43. Pulte Homes Inc. rose 20 cents, or 2.2 percent, to $9.34.
Richard Ross, global technical strategist at Auerbach Grayson in New York, said investors aren't willing to give up on the market's surge even if they have concerns it might be overdone.
"It speaks to that sort of bullish undercurrent," he said. "Whether it's misplaced optimism, that's another question."
Four stocks rose for every one that fell on the New York Stock Exchange, where volume came to 803.9 million shares compared with 751.2 million shares traded at the same point Monday.
The Russell 2000 index of smaller companies rose 8.27, or 1.4 percent, to 588.00.
Overseas markets jumped as fears eased about Dubai's credit problems. The emirate's government investment company said it was looking at restructuring part of its $60 billion in debt.
Japan's Nikkei stock average added 2.4 percent. Britain's FTSE 100 rose 2.3 percent, Germany's DAX index advanced 2.7 percent, and France's CAC-40 rose 2.6 percent.