DR Horton cements construction stocks

US stocks rallied for a second day yesterday as better-than-expected earnings and encouraging data calmed investors after the market’s recent sell-off.

Rising sales of previously owned US homes and robust earnings from bellwethers representing consumer and industrial businesses, including Whirlpool and Cummins, pointed to a steady rebound in demand.

“The housing data, followed by the ISM data yesterday and the GDP last week, are making investors believe that the strength in the fourth quarter was not a fluke, and that the strength could be sustainable in the first quarter and beyond,” said Bruce Bittles, chief investment strategist at Robert W. Baird in Nashville, Tennessee.

The home builders received a double jolt of good news. In addition to a 1 per cent gain in December pending sales of existing US homes, DR Horton, one of the top five US home builders, reported its first quarterly profit in almost three years. DR Horton’s stock gained 10.9 per cent to $13.21. The Dow Jones US home construction index rose 6.5 per cent.

The Dow Jones industrial average rose 111.32 points, or 1.09 per cent, to end at 10,296.85. The Standard & Poor's 500 Index gained 14.13 points, or 1.30 per cent, to 1,103.32. The Nasdaq Composite Index advanced 18.86 points, or 0.87 per cent, to 2,190.06.

The S&P 500’s gain was its biggest two-day percentage jump since October 2009, after falling 6.2 per cent in the last three weeks of January.

The day’s home sales data followed a string of encouraging economic news, including Monday’s data on the US manufacturing sector from the Institute for Supply Management, and Friday’s report on the economy’s fourth-quarter growth.

Shares of UPS added 0.4 per cent to $58.62 after the world’s largest package shipper by volume reported a drop in fourth-quarter profit, but forecast a sharp increase in 2010 earnings.

Whirlpool gained 8.1 per cent to $82.23 after the appliance manufacturer reported a sharp increase in first-quarter earnings.

Exposure to emerging markets helped major industrial companies Cummins and Emerson Electric, post rosy quarterly earnings. Cummins’ stock rose 8.8 per cent to $51.09, while Emerson’s stock jumped 10.1 per cent to $46.77.

The S&P 500 industrial sector index gained 1.9 per cent. Amazon.com slid for a second straight day, falling 0.6 per cent to $118.12.