Market extends its four-week rally

The Associated PressApril 2, 2009 

— Wall Street began the second quarter on solid footing Wednesday as better-than-expected economic reports helped extend a four-week rally.

After falling in the early going on disappointing jobs data, the Dow Jones industrials ended with a gain of 152.68, or 2 percent, to 7,761.60, following reports showing a rebound in pending home sales and improving manufacturing activity. Other major indexes rose about 1.5 percent.

The Standard & Poor's 500 rose 13.21, or 1.7 percent, to 811.08. The technology-heavy Nasdaq gained 23.01, or 1.5 percent, to 1,551.60.

The Russell 2000 index of smaller companies rose 6.41, or 1.5 percent, to 429.16.

Financial stocks led the market higher, followed by big gains in technology and energy shares. As sentiment about the economy improves, investors have been buying up industries they think are likely to lead the country out of recession.

The Dow charged ahead in March, rising 16 percent off 12-year lows early in the month, but its movements over the first three months of the year have been among the most tumultuous on record. Only three other times in the Dow's history has it experienced 20 percent swings in both directions in one quarter.

Better economic data and an improving outlook on U.S. banks in recent weeks have fueled optimism that the recession could end this year. But there are still a number of analysts who warn against calling a bottom to the market too soon.

Volatility is expected to continue as investors try to gauge where the economy goes from here.

"People seem to swing from one side to the other of 'the recovery has started' to 'the world is ending again,' " said Bill Stone, investment strategist at PNC Wealth Management.

On Wednesday, more positive economic data helped feed the rally.

Pending home sales rebounded in February from a record low, the National Association of Realtors reported, while the Institute for Supply Management's index of manufacturing activity contracted less than anticipated in March.

"It's hard to call it good data in a normal environment, but it certainly looks like some of the ... housing activity has at least stabilized," said Stephen Massocca, managing director at Wedbush, Morgan Securities. "That's helping the market quite a bit here."

This week so far has been volatile, and analysts expect that theme to continue in the coming weeks as the uncertainty of first-quarter earnings reports overhangs the market.

"We're in a wait-and-see mode for earnings," said Brian Bush, director of equity research at Stephens. "And not just what the earnings were for the first quarter, but what the earnings outlook will be for the rest of the year."

Analysts expect most reports to be negative, but with the bar set so low, it's possible the market could move higher if the reports meet or exceed expectations.

At the same time, Bush said companies could prerelease earnings because they are worse-than-expected.

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