Investors regained their enthusiasm for stocks Tuesday, sending prices sharply after reports showed a slight improvement in the housing market and a big jump in industrial production.
Investors were also encouraged by earnings from Home Depot Inc. and Wal-Mart Stores Inc. that were better than expected. The Dow Jones industrial average rose 144 points in midday trading. All the major stock indexes were up more than 1 percent.
Economic reports in recent months have almost exclusively pointed to slowing growth. Weakening data has led some investors to worry that the country could fall back into recession. The data Tuesday provided a slice of optimism and some reassurance that the economy continues to expand, albeit slowly.
"The data and earnings should ease people's concerns about a double-dip" recession, said Peter Bible, a partner at EisnerAmper. "We're anemic; we're slow; we're crawling, but we're not going backward."
Prices at the wholesale level rose 0.2 percent last month, the Labor Department said, lessening worries about deflation. It was the first increase since March and matched expectations of economists polled by Thomson Reuters. Excluding volatile food and energy costs, the index rose 0.3 percent in July, more than the 0.1 percent growth predicted by economists.
Jitters over a double-dip recession have many investors looking for the first signs that prices and wages are on the way down. If that happens, it will trim profits and potentially dampen hiring even more. High unemployment is considered the biggest obstacle to a strong recovery right now.
Industrial production jumped 1 percent in July, double the 0.5 percent growth forecast by economists. Rising output at the nation's factories, mines and utilities comes after multiple manufacturing reports had shown a pronounced slowdown over the past couple of months.
In midday trading, the Dow Jones industrial average rose 144.03, or 1.4 percent, to 10,446.04 The Standard & Poor's 500 index rose 17.15, or 1.6 percent, to 1,096.53, while the Nasdaq composite index rose 36.33, or 1.7 percent, to 2,218.20.
About five stocks rose for one that fell on the New York Stock Exchange where volume came to 327.6 million shares.
With volume light in recent weeks, trading has been volatile. The few active traders in the market have often reacted to the latest piece of news to propel stocks higher or lower. Low volume also indicates that many investors are still uncertain about the strength of the economy and choosing to stay out of the market completely.
The Commerce Department said construction of new homes and apartments rose 1.7 percent in July, but applications for building permits fell by a higher than expected 3.1 percent. Building permit applications are considered a good gauge of future activity.
Home sales have struggled to regain momentum after a home buyer tax credit expired at the end of April. So signs of stabilization in the market are considered somewhat positive after the sharp declines that followed after the expiration of the tax credit.
Home Depot followed fellow home-improvement retailer Lowe's in beating earnings expectations. Home Depot, as Lowe's did on Monday, modestly cut its revenue forecast as shoppers remain cautious about spending amid high unemployment. The company also raised its earnings forecast because of share repurchases.
Aside from better-than-expected earnings, Wal-Mart raised its earnings outlook because of continued cost-cutting measures and strong global growth in China, Brazil and Mexico.
Wal-Mart shares rose $1.00, or 2 percent, at $51.41. Home Depot rose $1.34, or 4.9 percent, to $28.72.
Meanwhile, Potash Corp. of Saskatchewan Inc. rejected an unsolicited takeover bid from BHP Billiton Ltd. worth about $38.49 billion, or $130 per share. Potash, a fertilizer producer, said the bid undervalued the company.
Global packaging company Reynolds Group Holdings Ltd. will buy Pactiv Corp., maker of the Hefty brand trash bags, for about $4.4 billion, or $33.25 per share, in cash. Including debt, the deal is value at about $6 billion.
Merger and acquisition activity is considered a positive sign for the economy because it means companies are betting the economy will grow in the near future. The rejection of the Potash deal also means it is confident the company is worth even more than the asking price because it sees growth as well.
Shares of Potash surged after the company rejected the offer. They rose $27.58, or 24.6 percent, to $139.73. Pactiv shares jumped $1.67, or 5.4 percent, to $32.59.
With investors looking to buy stocks, bond prices fell. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.64 percent from 2.57 percent late Monday. Its yield is often used to set interest rates on mortgages and other consumer loans.
Overseas, Britain's FTSE 100 rose 1.4 percent, Germany's DAX index gained 1.6 percent, and France's CAC-40 rose 1.8 percent. Japan's Nikkei stock average fell 0.4 percent.