Hopes that the problem of foreclosed homes is getting nearer its resolution has rekindled Wall Street activities, pushing up stock indexes on Monday to their highest levels in several months.
The rise of the National Association of Realtors' pending home sales index by 3.2 percent from February stepped up Wall Street hopes that the housing market downed by foreclosed homes is on its way to recovery.
The Dow Jones industrial average rose by 2.6 percent to 8,426.7 points, its highest level in nearly 4 months. Similarly, the S&P 500 index increased by 3.4 percent to 907, the first time it went past 900 since January 8.
The Nasdaq reached its highest point in 6 months when it increased by 2.6 percent to 1,763.6.
Kevin Mahn, managing director for Hennion & Walsh, said that it is encouraging that reports of recovery in the housing sector, which was battered by foreclosed homes, has spurred Wall Street activity. He also added that if the contention that the worldwide economic downturn arose from foreclosed homes in the U.S., then reports of the start of housing recovery are inspiring.
Mahn also credited Warren Buffett's remarks at his Berkshire Hathaway's annual meeting on the positive Wall Street response. Buffett predicted that the recession, largely caused by the avalanche of foreclosed homes, is nearing its end and that no U.S. major bank will collapse. He also asserted the continued strength of Wells Fargo, one of the largest portfolios held by Berkshire, and stated that Berkshire will report an operating profit in the first quarter.
The stock indexes also had strong surges in April, with the S&P 500 jumping by 9.4 percent, the Dow index rising by 7.3 percent and the Nasdaq soaring by 12.3 percent. The Nasdaq increased for the past 8 consecutive weeks while the Dow index and S&P 500 increased in 7 of the past 8 weeks.
The indexes are showing positive signs, but analysts are still waiting for some more signs that much of the problems largely caused by the glut of foreclosed homes have been resolved.
Harris Private Bank's chief investment officer Jack Ablin said the stock market needs another major push for it to have the elements of a bull market.
The federal government is expected to release the results of its stress tests on financial companies this week and initial reports said the major banks need to raise additional capital.
Even so, stocks of Wells Fargo, Bank of America, Citigroup and other banks rallied, raising hopes that the crisis which arose from the flood of foreclosed homes is nearing its end.
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