Wall Street rose modestly Friday, securing the Dow Jones industrials’ best week in four years after a surprise jump in home sales eased concern that frailty in the housing market will hurt economic growth.
Existing home sales rose by the biggest amount in nearly three years in February amid a sharp increase in sales in the Northeast, the National Association of Realtors said. The 3.9 percent increase was the largest since a similar jump in March 2004; analysts had been expecting a decrease.
Still, the report did have some downbeat aspects — the median price of a home fell year-over-year for the seventh straight month and inventories rose.
The Federal Reserve this week said an “adjustment” in the housing sector was continuing, offering some relief for investors left unnerved by the woes among so-called subprime mortgage lenders. Wall Street had grown concerned that an implosion among subprime lenders, which make loans to people with poor credit, could spill over into other parts of the economy and derail already slowing economic growth.
“People are realizing the housing market is bottoming and is not going to cause a recession in 2007,” said Noman Ali, U.S. equities portfolio manager at MFC Global Investment Management. “The consumer is really the main driving force of the economy and the consumer remains strong.”
The Dow rose 19.87, or 0.16 percent, to 12,481.01. The blue chip index rose for five straight sessions, picking up 370.60 for its biggest weekly point gain since March 2003; that translated to a 3.06 percent rise for the week.
Broader stock indicators also closed higher. The Standard & Poor’s 500 index advanced 1.57, or 0.11 percent, to 1,436.11, and the Nasdaq composite index rose 4.44, or 0.18 percent, to 2,456.18.
For the week, the S&P 500 rose 3.54 percent and the Nasdaq gained 4.52 percent.
Bonds fell following release of the housing data. The yield on the benchmark 10-year Treasury note rose to 4.61 percent from 4.58 percent late Thursday. The dollar was mixed against other major currencies, while gold prices fell.
Light, sweet crude settled up 54 cents at $62.23 per barrel on the New York Mercantile Exchange. Oil prices rose following word that Iranian naval vessels had detained 15 British sailors and marines in Iraqi waters. Concerns arose that an escalation of tension could hurt exports from the Persian Gulf.
The week’s gains seemed to take Wall Street by surprise. Investors had expected the Fed would leave short-term interest rates at 5.25 percent but changes in the wording of the central bank’s policy statement seemed to offer something for everyone. Stocks rallied after the central bank didn’t refer to the possibility of “additional firming” of rates as it had in January. Instead, policy makers said “future policy adjustments” would depend on inflation and growth. Despite the more neutral language about the possibility of a rate cut, the Fed said it remains vigilant about the threat of inflation.
Advancing issues narrowly outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to 1.39 billion shares, down from 1.62 billion Thursday.
The Russell 2000 index of smaller companies rose 1.46, or 0.18 percent, to 809.51.
Overseas, Japan’s Nikkei stock average closed up 0.35 percent, Hong Kong’s Hang Seng index edged up 0.01 percent and the sometimes volatile Shanghai Composite Index advanced 0.10 percent, which closed at a record high for the third straight day. A nearly 9 percent drop in the Shanghai Composite Index on Feb. 27 helped kick off the global selloff.
Britain’s FTSE 100 ended up 0.34 percent, Germany’s DAX index gained 0.61 percent, and France’s CAC-40 added 0.65 percent.