Good Jobs & Housing News Sparks Stock Surge

TOM HUDSON, NIGHTLY BUSINESS REPORT ANCHOR: The Dow Industrials hasn’t been this high since the spring of 2008, Susie. The gains we saw today really powered by fresh signs of improvement here in the U.S.

SUSIE GHARIB, NIGHTLY BUSINESS REPORT ANCHOR: Tom, it was a winning day on Wall Street and that’s thanks to good news about housing and the job market. Jobless claims fell by a bigger than expected 13,000 in the past week to the lowest point in four years. Housing starts rose more than expected, up 1.5 percent in January. Investors focused on this upbeat news on the U.S. economy and shrugged off worries about Greece. The Dow surged 123 points, moving closer to the key 13,000 level. The NASDAQ added 44, closing at its highest level in 11 years and the S&P rose 15.

HUDSON: As impressive as those gains are that we saw today, it’s the riskiest part of the stock market that has seen the biggest rewards. Erika Miller reports from New York.

MILLER: Investors have been cranking up the risk in their portfolios this year as they see signs the U.S. recovery is picking up steam. The S&P 600, a small-cap index, has risen twice as much as the Dow Jones Industrial Average this year and is trading near all-time highs.

STEPHEN WOOD, CHIEF MARKET STRATEGIST, RUSSELL INVESTMENTS: To the extent that the investment world sees the economy in the United States improving and liquidity improving and earnings improving, that helps smaller cap stocks because they are more exposed to the U.S.

MILLER: Most of the major market benchmarks have gone up virtually
in a straight line for two months now. As great as that sounds, it has some analysts concerned that the rally has gotten ahead of itself.
Jonathan Corpina is a floor trader and believes a short-term pullback is coming, probably in the spring.

JONATHAN CORPINA, SR. MANAGING PARTNER, MERIDIAN EQUITY PARTNERS: I think we are going to see a nice little pause in our market because of two factors — one is, normally during the middle of the year, things do start to slow down; and two is we are in an election year. As we get closer to that, I think investors are going to be pretty happy about the returns they’ve had this year. They are going to take significant risk off the table.

MILLER: But longer term, he and others think the market will move higher on the back of good earnings news. The big risk, of course, is what happens in Europe and whether Greece’s debt problems spread.

WOOD: Europe is the biggest source of risk that we see on the investment horizon. We are in the hands of European politicians and the best efforts of European politicians. So that, by definition, it’s a risky environment.

MILLER: There’s something else that troubles even bullish analysts– low trading volume, which typically means heightened volatility. Fortunately for investors, the big swings in the market lately have been to the upside. Erika Miller, NIGHTLY BUSINESS REPORT, at the New York Stock Exchange

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