Rally erases S&P losses for year

NEW YORK (AP) — Another big rally on Wall Street has erased the losses suffered by the Standard & Poor’s 500 index this year.

The S&P 500, the market barometer preferred by professional investors, is now up 0.4 percent for 2009. Many investments such as mutual funds either mirror or are measured against the index.

Gains in housing, financial and materials stocks pushed the S&P up 3.4 percent Monday. The Dow Jones industrial average jumped 214 points but is still down 4 percent for the year.

Two new economic nuggets bolstered the case that the economy’s slide could be slowing and helped extend a two-month rally. Pending U.S. home sales increased more than expected to post their second straight monthly gain, while construction spending rose unexpectedly in March after five straight decreases.

Jerry Webman, chief economist at Oppenheimer Funds Inc., said stocks are rallying because investors aren’t fearful as they were months ago that the economy is headed for the abyss. Much of the economic and earnings news since the stock market hit 12-year-lows in early March has been at least somewhat upbeat.

“There’s been this fear that every six months another shoe drops and maybe there isn’t a shoe in midair right now,” he said.

According to preliminary calculations, the S&P 500 index rose 29.72, or 3.4 percent, to 907.24, its first close above 900 since Jan. 8. The index had previously only been higher in the first five trading days of the year.

The rally came after the National Association of Realtors said its index of pending sales for previously occupied homes rose 3.2 percent to 84.6. That was well ahead of the 82.1 economists had been expecting and the second month of gains after the index hit a record low in January.

Separately, the Commerce Department said construction spending rose 0.3 percent, the best showing since a similar increase last September. Economists surveyed by Thomson Reuters had expected spending to drop 1.5 percent.

David Kelly, chief market strategist at JPMorgan Funds, said each piece of better-than-expected economic news is easing worries that the recession would worsen.