Stocks edge higher on home building, low inflation
NEW YORK • U.S. stocks were up in early trading Tuesday, boosted by government reports of gains in home construction and low inflation. Expectations that the Federal Reserve will keep in place programs meant to prop up the economy also drove the market higher.
The Dow Jones industrial average was up 75 points, or 0.5 percent, to 15,253 after the first hour of trading.
The Standard & Poor's 500 index edged up five points, or 0.3 percent, to 1,644. All 10 industry groups in the index rose, led by telecommunications.
The Commerce Department said that the pace of new home building was up in May, helped by more buyers and a scarcity of houses for sale.
The Fed has had an outsized effect on the stock market in recent weeks, with major indexes getting yanked back and forth after Fed Chairman Ben Bernanke said May 22 that the central bank could pull back on its bond-buying program, which is meant to help the economy by driving investors into stocks and keeping interest rates low. Fed policymakers began meeting Tuesday, but it won't be until Wednesday that they announce their latest policy decisions.
For many investors, Tuesday was just a holding pattern ahead of Wednesday's Fed news.
"The big wind blowing is what's coming from the Fed meeting, and right now the wind is not blowing," said Brian Doe, wealth adviser at Gratus Capital in Atlanta. "We have this little calm where everybody can be optimistic."
Despite Tuesday's report on a pickup in home building, many analysts think Fed leaders will determine that the economy is still weak enough to need Fed stimulus, which has generally made them send stocks higher. That's largely because the government's jobs report earlier this month showed that, while the U.S., economy is still adding jobs, it's not at a rate fast enough to bring down the unemployment level.
The Labor Department reported Tuesday that U.S. consumer prices rose in May, but only slightly. That's also likely to weigh in on the Fed's decision making: The Fed knows that its stimulus programs can boost inflation. If inflation is in check, that gives the Fed more leeway to continue the programs.
Stocks were up throughout most of Europe, despite reminders that the economy there is still far from healed. European car sales hit their lowest level for the month of May in 20 years. In Greece, bickering continued over the prime minister's decision last week to shut down state TV in an effort to try to save money.
In other U.S. stock trading, the Nasdaq composite index rose 15 points, or 0.4 percent, to 3,467.
Among stocks making big moves:
Hormel Foods, the maker of Spam and Skippy peanut butter, slipped after the company said it expects lower profits for the year. The stock fell $2.01, or 5 percent, to $38.63.
Jack in the Box was up after announcing it will close about 20 percent of the Qdoba Mexican Grill restaurants that it owns. Jack in the Box rose 97 cents, or 2.6 percent, to $37.96.
Signet Jewelers, which runs the Kay Jewelers and Jared brands, rose after announcing that it plans to buy back up to $350 million of its own stock. Signet rose $1.05, or 1.5 percent, to $69.02.