Earnings data help stocks

August 19, 2009 at 12:00a.m.

NEW YORK (AP) — Now investors seem to be saying that maybe things aren’t so bad after all.

Some better-than-expected retail earnings reports and the latest reading on housing Tuesday drew investors back into the stock market after the previous day’s big selloff. The major indexes rose about 1 percent, led by a surge in financial and technology companies.

Investors were still wary about consumer spending and its impact on the economy but heard enough good news to fuel the comeback from Monday’s 186-point slide in the Dow Jones industrials. Analysts said investors were putting things in perspective, believing the pullback was a bit overdone.

The U.S. market was also taking some cues from overseas exchanges, which got a boost from encouraging news about the German economy. And bond prices retreated as investors’ anxiety eased.

“The outlook for the economy doesn’t change every 24 hours,” said Alan Skrainka, chief market strategist at Edward Jones. “The news is always mixed even after you’ve hit bottom.”

Investors have been battling mixed signals on the economy for several weeks; housing and manufacturing have been improving, but consumer spending is still sagging. On Monday, stocks fell by the biggest amount in six weeks as investors’ growing fears that consumers won’t spend enough to lift the economy into recovery caught up with them.

The earnings reports from retailers Tuesday showed that American consumers are still shy about spending, but results weren’t quite as bad as analysts expected and that helped calm some investors’ nerves.

Analysts have warned that the market has gotten ahead of itself and that some pullback is inevitable, given the more than 40 percent climb in stocks since March and the challenges that still exist in high unemployment and waning consumer confidence. But the market continues to show resilience, with any retreat in stocks being brief.

According to preliminary calculations, the Dow rose 82.60, or 0.9 percent, to 9,217.94. The Standard & Poor’s 500 index gained 9.94, or 1 percent, to 989.67, while the Nasdaq composite index rose 25.08, or 1.3 percent, to 1,955.92.

Meanwhile, bond prices dipped after the previous day’s big gains, which were a response to investors’ nervousness about the economy. The yield on the benchmark 10-year Treasury note, which moves in the opposite direction from its price, rose to 3.52 percent from 3.47 percent late Monday.