Wall Street advanced in uneven trading today after a drop in oil prices and an unexpected gain in new home sales encouraged investors to put money back into the market.
Stocks picked up momentum late in the session as oil prices drifted below US$129 a barrel. This helped ease investor concerns about the effect of soaring energy and food prices on consumers, who account for more than two-thirds of US economic activity.
With gas prices up sharply from a year ago, many on Wall Street are worried that nervous consumers will stop reaching into their wallets for discretionary purchases.
That was confirmed by fresh data from the Conference Board, which said its Consumer Confidence Index dropped for the fifth straight month and is now at its lowest level since October 1992.
Investors were also somewhat reassured after the Commerce Department said sales of new homes rose 3.3% in April to a seasonally adjusted rate of 526,000 units. In March, sales fell 11% to their weakest pace since 1991.
The three major indexes traded with uncertainty through most of the session, and showed investors remained hesitant to place big bets. Many on Wall Street believe there is still plenty to be cautious about.
Stephen Carl, principal and head of equity trading at The Williams Capital Group, said: "You have a problematic scenario: falling home prices, rising food and energy prices, the credit crunch, and the labour market isn't doing that well.
"We're going through this period right now, and it's going to take some time to come out of it."
The Dow Jones industrial average rose 68.72, or 0.55%, to 12,548.35.
The Standard & Poor's 500 index rose 9.42, or 0.68%, to 1,385.35, and the Nasdaq composite index rose 36.57, or 1.50%, to 2,481.24.
The advance came after the Dow lost 3.91% last week - its worst showing since February - while the other indexes showed similar declines. Investors sold off stocks amid concerns about rising energy prices and after a sizable run-up since the market's lows in mid-March.
Bond prices fell today. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.92% from 3.85% late on Friday.
A barrel of light sweet crude fell $3.34 to settle at $128.85 on the New York Mercantile Exchange. Gold fell, while the dollar gained.
Earlier in today's session, the Standard & Poor's/Case-Shiller home price index indicated that prices fell 14.1% during the quarter. The drop was expected by most investors - and the US government's report on new home sales was considered more important because it is the most recent gauge on the industry.
Todd Salamone, director of trading at Schaeffer's Investment Research in Cincinnati, said investors were also focused ahead of more economic data due during the week.
"There's a ton of reports that will give us a better idea about the consumer, and that's what we're watching," he said.
Economic reports on tap include tomorrow's government data on durable goods that will provide more insight into consumer spending on big-ticket items.
On Friday, the University of Michigan will release its report on consumer sentiment, the government data will issue personal spending numbers and the Chicago Purchasing Managers Index will be released.
Federal Reserve Bank of San Francisco president Janet Yellen, who is not a voting member of the central bank, said in prepared comments at a speech in California that any interest rate hikes are still some way off. She also reiterated that the economy should pick up during the second half.
In corporate news, Vodafone Group posted a full-year profit and said its chief executive plans to resign.
The world's biggest mobile phone company by sales said Arun Sarin will be replaced by his deputy, Vittorio Colao. Shares of Vodafone fell 34 cents to 32.21.
Blackstone Group and Apollo Management are holding discussions about acquiring speciality chemicals maker Chemtura, according to a report by the Wall Street Journal.
Blackstone shares rose 37 cents at 18.91, while Chemtura shares rose 67 cents, or 8.6%, to 8.47.
Flotek Industries fell 1.85, or 9.6%, to 17.32 after the provider of oilfield services reduced its full-year profit forecast because of increased costs and delays in the delivery of parts.
The Russell 200 index of smaller companies rose 10.28, or 1.42%, to 734.38.
Advancing issues led decliners by three to two on the New York Stock Exchange, where volume came to 900.9 million shares.