Dow rallies on strong housing data

NEW YORK – Stocks advanced Thursday, giving the Dow Jones Industrial Average its biggest two-day rally since July, as purchases of existing homes unexpectedly jumped, retail sales topped analysts’ estimates and Goldman Sachs recommended buying financial shares.

The S&P 500 rose 1.3 percent to 1,221.53 after gaining 2.2 percent Wednesday. The last time the measure posted two straight advances exceeding one percent was in February. The Dow gained 106.63 points, or 1 percent, to 11,362.41. Both gauges are up more than 3.2 percent in December.

“The market is telling us that the economy is doing better than expected,” said Hank Smith, chief investment officer at Haverford Trust in Radnor, Pa. “Buying financial stocks is one way to play the improvement in the macroeconomic environment.”

Goldman Sachs’ investment strategist David Kostin said the S&P 500 may rise to 1,450 by the end of next year, a gain of more than 20 percent from Wednesday’s close, as the economic recovery accelerates.

US equities advanced early Thursday as European Central Bank policy makers meeting in Frankfurt kept the benchmark interest rate at a record low of one percent and delayed the bank’s exit from emergency liquidity measures as the debt crisis threatens to engulf Portugal and Spain. The ECB didn’t announce new measures to halt the crisis.

In addition, the number of applications for jobless benefits averaged 431,000 a week over the month ended Nov. 27, the lowest level since August 2008, Labor Department figures showed. Claims increased by 26,000 last week, more than forecast, to 436,000, after reaching a two-year low.

“We’re picking up strength,” said Tom Wirth, senior investment officer for Chemung Canal Trust in Elmira, N.Y. “Almost every data point we get over here is telling us no double-dip recession.”

A measure of 12 homebuilders in S&P indexes rallied 3.9 percent, as all of its companies gained at least 2.2 percent. Pending sales of US existing houses unexpectedly jumped a record 10 percent in October, the National Association of Realtors said.