US stocks rallied on Tuesday following their first three-day losing streak of the year, after central banks reassured investors that they will keep policies designed to foster global growth. Further boosting the market, data showed consumer confidence was the strongest in May in over five years, while home prices accelerated in March by the most in nearly seven years.
---- Tiffany shares rally after strong results
The economic reports on housing and consumers suggested resilience for an economy despite the pinch of belt-tightening from automatic cuts in federal spending. Equity investors have been very attuned to monetary policy, with the major US stock indexes last week posting their first negative week since mid-April on lingering concerns that the Federal Reserve may scale back its stimulus measures sooner than expected.
But the Bank of Japan and the European Central Bank reaffirmed that their accommodative policies would remain in place, helping the S&P 500 recover nearly all of the losses suffered in the previous three sessions. On Monday, when US markets were closed for the Memorial Day holiday, ECB Executive Board member Joerg Asmussen said the policy would stay as long as necessary. On Tuesday, BOJ board member Ryuzo Miyao said it was vital to keep long- and short-term interest rates stable.
"I was surprised by how virulent the rally was today, I would have thought we would have cooled our jets for a little bit longer period," said Stephen Massocca, managing director, Wedbush Equity Management LLC in San Francisco. "But when you have zero percent interest rates and very aggressive central banking, these are the kind of rallies you are going to see."
Monetary stimulus has contributed to Wall Street's gains this year, with the S&P 500 up about 17 percent. Analysts have also cited earnings growth and relatively cheap valuations as reasons that investors have used any market decline as a buying opportunity, helping drive both the Dow and the S&P 500 to a series of record highs.
Cyclical sectors, closely tied to the pace of economic growth, are likely to advance on any sign of continued supportive policies. Bank of America rose 1.6 percent to $13.45 while Citigroup Inc gained 1.9 percent at $51.49. The KBW Bank index advanced 1.4 percent.
The Dow Jones industrial average gained 141.61 points, or 0.93 percent, to 15,444.71. The Standard & Poor's 500 Index gained 14.49 points, or 0.88 percent, to 1,664.09. The Nasdaq Composite Index gained 35.71 points, or 1.03 percent, to 3,494.86. The Conference Board, an industry group, said its index of consumer attitudes jumped to 76.2 from an upwardly revised 69 in April, topping economists' expectations for 71. It was the best level since February 2008.
Luxury retailer Tiffany & Co reported adjusted earnings and sales that beat expectations, sending shares up 3.4 percent to $78.80. Tiffany was one of the S&P 500's best performers. The S&P/Case Shiller index showed home prices rose 1.1 percent in March, compared with the previous month. Analysts were looking for a rise of 1 percent.
"The housing numbers today were good, and housing is really a lot more important to the economy than what a lot of people may think," said Brian Gendreau, market strategist with Los Angeles, California-based firm Cetera Financial Group. "It's a very good sign of how the economy is doing, and today's numbers are good for the market." Omthera Pharmaceuticals soared 99.1 percent to $13.48 after AstraZeneca agreed to buy the company for $443 million. US-listed shares of AstraZeneca gained 1.6 percent to $53.
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