The Dow Jones industrial average rose 177.56 points, or 1.78%, to 10,145.71. The tech-heavy Nasdaq composite index added 45.34 points, or 2.63%, to 1,769.88. The broader Standard & Poor's 500 index gained 19.60 points, or 1.80%, to 1,109.43.
The market was surprised by a report that sales of existing homes surged 16.2% in January, far better than the 2% rise economists were predicting.
"The strength of the housing data this morning is symptomatic of strong data we're seeing virtually everywhere, but that the market has been ignoring because of accounting concerns," says Phil Orlando, chief investment officer at Value Line Asset Management.
Though many expect ugly news ahead for corporate profits overall, several companies issued encouraging earnings news Monday. Wireless communications gear maker Qualcomm's (QCOM
) reaffirmed its previous guidance of about $0.20 a share in pro forma earnings for its fiscal second quarter ending March 31. The news helped boost tech stocks.
General Motors' (GM
) improved profit outlook helped the blue-chip Dow average. GM raised its estimates for the first-quarter and full-year earnings and production schedules, amid better than expected U.S. car sales and strong retail sales of the company's vehicles.
Among other Dow stocks, Eastman Kodak (EK
) also reaffirmed its earnings outlook. The company says it still sees first quarter per-share profits of between $2.00 to $2.60 per share for the full year.
In other company news, Lowe's Cos. (LOW
), the world's second-largest home improvement retailer, reported a 55% increase in fiscal fourth-quarter profit. The company and said first quarter and fiscal 2002 earnings would top current estimates amid continued strong home improvement spending and a rebounding economy.
Despite the solid earnings outlooks, many analysts expect stocks to remain volatile as investors continue to fret over the strength of the economic recovery and ongoing worries over accounting practices.
Peter Cardillo, chief strategist at Global Partners Securities, is more optimistic that the market will begin to shift its focus away from potential accounting blowups. Cardillo expects investors to begin to pay more attention to recent positive economic data. "Hopefully [accounting worries] about IBM brought the market to a climactic plateau." Last week, the technology giant became the latest company to get hit by worries over its accounting methods.
Looking ahead, markets will have many indicators to watch this week for direction. Federal Reserve Chairman Alan Greenspan will testify on monetary policy Wednesday. When last he spoke, the Fed chief expressed cautious optimism that the economy is on the mend.
In economic news, investors will digest the latest revision to fourth quarter gross domestic product on Thursday. In the most recent revision, GDP for the quarter came in at an increase of 0.2%. S&P economists are expecting a revision to a gain of 0.9%.
On the tech front, Robertson Stephens' highly watched annual industry conference began Monday and runs through Thursday. Hewlett Packard's (HWP
) analyst meeting this week will be also be carefully scrutinized. The company posted a large upside earnings surprise just a few weeks ago.
Several big-name retailers will be issuing earnings results this week. Dow component Home Depot's (HD
) report is set for Tuesday, while Gap Stores (GPS
) is expected to post its results Wednesday. Discount chain Target (TGT
) will report on Thursday.
U.S. Treasuries finished down in price as investors shifted into equities after better than projected housing data. Traders' attention is on Greenspan's testimony Wednesday, when he will discuss the economy and monetary policy in front of the House, says S&P's economic research unit, MMS.
The latest update on existing home sales took a toll on Treasuries, MMS says. The 16.2% jump in January put sales at a record 6.040 million annual pace, from a marginally revised 5.20 million pace in December (along with upward revisions in September-November figures). The numbers are much stronger than expected, and though NAR officials attributed some of the strength to good weather, the data nevertheless continue to reflect the resilience and leadership in the housing market.
Several key economic releases -- durable goods orders for January, an update on manufacturing as well as consumer confidence -- are due out later in the week.
European stock markets rallied with the U.S. In London, the FTSE 100 index finished up 49.90 points, or 0.99%, to 5,100.70, amid a report that the Bank of England's chief said he saw signs the British economy was improving. In Germany, the DAX index finished up 117.96 points, or 2.49%, to 4,863.54, after the German finance ministry said it sees the economy on the verge of recovery. In France, the CAC 40 ended higher by 60.24 points, or 1.42%, to 4,305.44.
Asian markets ended lower. In Japan, the Nikkei fell 60.31 points, or 0.58%, to 10,296.47, as profit-taking hit select technology and retail companies. In Hong Kong, the Hang Seng lost 168.92 points, or 1.58%, to 10,496.02. By Amy Tsao in New York