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Strong economic reports from the U.S. and Europe lifted traders' spirits, sparking a powerful rally across equity and commodities markets on Tuesday.
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As of 3:06 p.m. ET, the Dow Jones Industrial Average jumped 327 points, or 2.9%, to 12,094, the S&P 500 climbed 35.4 points, or 2.9%, to 1,241 and the Nasdaq Composite surged 78.2 points, or 3.1%, to 2,601.
Financial, energy, basic material and industrial companies led the charge higher on Tuesday. Caterpillar (NYSE:CAT), JPMorgan Chase (NYSE:JPM) and Disney (NYSE:DIS) were among the best-performing blue chips. In a sign of the breadth of the rally, every Dow component and all but 10 stocks included in the broad S&P 500 were to the upside.
Volume in advancing shares outnumbered declining issues on the New York Stock Exchange by close to 36-to-one, while volatility dropped. Indeed, the CBOE's VIX tumbled 7.6% to 23. Wall Street's fear gauge is on track to close below 25 for the third-straight session, which has occurred only one time in the past four months, according to an analysis by Dow Jones Newswires.
Oil prices rallied 3.6%, while the yield on U.S. government debt climbed as traders shed the safe-haven asset.
Strong Housing Data
The market for new homes showed significant improvement in November. Housing starts rose by a better-than-expected 9.3% from October to a 685,000-unit rate. The forward-looking indicator is now at its highest level since April 2010. Housing permits also topped estimates, rising 5.7% to a 681,000-unit rate.
"The increase, coupled with the improvement in home builder sentiment over the past few months, suggests the housing market may finally be breaking out of the 'bounce along the bottom' environment that housing has been stuck in since early 2009," analysts at Nomura wrote in a research note.
The housing market has been slow to improve as credit conditions remain tight, and the supple of homes on the market remains high.
Upbeat Developments from Europe
Business sentiment in Europe's biggest economy rose at the fastest rate since February in December, the second-straight month of gains, according to a closely-watched survey by Ifo, a Munich-based think tank.
The better-than-expected report from Germany comes as a "quite good" development for Europe, James Hughes, senior market analyst at Alpari said in an interview with FOX Business.
Traders have also been paying close attention to eurozone bond auctions, particularly in countries like Spain and Italy where yields have risen close to unsustainable levels. Spain sold 5.6 billion euro of short-term bonds at an offering on Tuesday, well above the 4.5 billion it targeted. The yields that investors demanded on both the three-month and six-month notes also fell sharply.
"If one [auction] is good, it breeds confidence for the next one," Hughes said.
The benchmark Spanish 10-year note presently yields 5.1%, while Italy's yields 6.62%, both elevated but well off of recent highs. European blue chips surged 2.7%, while the euro was up 0.58% to $1.3075. The greenback fell 0.5% against six trading partners.
Commodities markets were broadly to the upside as the U.S. dollar weakened. The benchmark New York crude oil contract jumped $3.34, or 3.6%, to $97.22 a barrel. Wholesale RBOB gasoline soared 3.6% to $2.5787 a gallon.
Gold rallied $20.90, or 1.3%, to $1,617 a troy ounce. Investors sold U.S. Treasuries, giving yields a boost. The benchmark 10-year note yields 1.929% from 1.87%.
AT&T (NYSE:T) dropped its bid for Deutsche Telekom's T-Mobile USA after the closing bell on Monday, caving in to strong pressure from American antitrust regulators.
General Mills (NYSE:GIS) posted adjusted second-quarter earnings of 76 cents a share, topping expectations of 79 cents. Revenue was up 14% to $4.62 billion.
Jefferies (NYSE:JEF) said it earned $48.4 million, or 21 cents a share, last quarter, compared with a profit of $63.7 million, or 31 cents a share, a year earlier. Excluding one-time items, it earned 17 cents a share, beating the Street’s view of 14 cents.
European blue chips soared 2.7%, the English FTSE 100 jumped 1% to 5,420 and the German DAX rallied 3.1% to 5,847.
In Asia, the Japanese Nikkei 225 climbed 0.49% to 8,336 and the Chinese Hang Seng ticked 0.06% higher to 18,080.