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A strong report on the housing market combined with upbeat developments from Europe sent stock-index futures rallying on the heels of Monday's slump.
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As of 9:05 a.m. ET, Dow Jones Industrial Average futures jumped 141 points to 11,845, S&P 500 futures climbed 17 points to 1,216 and Nasdaq 100 futures gained 30 points to 2,243.
Positive economic data from both sides of the Atlantic, coupled with a relatively strong bond auction by the Spanish government, were the key drivers for the gains in U.S. stock-index futures along with more modest gains in European markets, market participants said.
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 5.16%, while Italy's yields 6.71%, both elevated but well off of recent highs. European blue chips jumped 0.89%, while the euro was up 0.47% against the U.S. dollar. The greenback fell 0.5% against six trading partners.
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. 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.
Commodities markets were broadly to the upside as the U.S. dollar weakened. The benchmark New York crude oil contract jumped $2.65, or 2.8%, to $96.53 a barrel. Wholesale RBOB gasoline climbed 2.7% to $2.555 a gallon.
Gold rallied $16.10, or 1%, to $1,613 a troy ounce. Investors sold U.S. Treasuries, giving yields a boost. The benchmark 10-year note yields 1.849% 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.
European blue chips jumped 1%, the English FTSE 100 dipped 0.19% to 5,355 and the German DAX rallied 0.97% to 5,726.
In Asia, the Japanese Nikkei 225 climbed 0.49% to 8,336 and the Chinese Hang Seng ticked 0.06% higher to 18,080.