NEW YORK — Reassuring news about housing and banking on Monday persuaded investors to return to the stock market.
The Dow Jones industrial average shot up 235 points, making up three-quarters of last week's losses. All the major indexes rose about 3 percent.
A better-than-expected profit report from Lowe's Cos., an uptick in homebuilder sentiment and positive comments from analysts about U.S. banks revived investors' confidence in an economic rebound. Stocks fell sharply last week on worries that a recovery might be further off than hoped, interrupting a rally that has left the Standard & Poor's 500index up 34.5 percent since March 9.
Steep drops in home values have been at the heart of the economy's troubles, slicing into consumers' wealth and saddling banks with huge losses. Analysts believe that stability in the housing and banking industries are imperative for the economy to rebound.
"There's a realization that things are going to get better," said James Cox, managing partner at Harris Financial Group. "That's the main theme of the market over the last couple of weeks."
Despite Monday's bounce, however, the market is expected to remain volatile as investors look for signs that the economy is actually recovering -- not just slowing its descent. At the start of the market's upswing in March, signs of stabilization were enough to encourage investors to buy stocks. Linda Duessel, equity market strategist at Federated Investors, said the rally has been driven by "less bad" information.
"Probably, we'll get bored with that as the months progress," Duessel said. "We'll need something better to move the market."
The Dow rose 235.44, or 2.9 percent, to 8,504.08. That was the biggest point gain since a 246-point jump April 9.
The S&P 500 index rose 26.83, or 3 percent, to 909.71, putting it back in positive territory for the year. The Nasdaq composite index rose 52.22, or 3.1 percent, to 1,732.36.
Last week, the Dow slid 3.6 percent, the S&P 500 index lost 5 percent and the Nasdaq fell 3.4 percent as a weak retail sales report and an uptick in job losses had investors questioning the merits of a two-month rally off 12-year lows.
But U.S. and European trading started on strong footing Monday after India's stock market rose an unprecedented 17 percent. Investors viewed the country's election results as paving the way for economic reforms.
U.S. stocks got a boost when Lowe's Cos., the nation's second-largest home improvement chain, posted earnings that easily beat Wall Street's forecasts and raised its full-year profit outlook.
Buying accelerated later in the day when the National Association of Home Builders said its housing market index rose for the second month in a row in May. The report reflected growing optimism among builders, an encouraging sign that housing activity might be picking up.
Stocks overseas were mixed. Japan's Nikkei average fell 2.4 percent. Britain's FTSE 100 jumped 2.3 percent, Germany's DAX rose 2.4 percent, and France's CAC-40 rose 2.4 percent.