U.S. stocks rise as European shares tumble with Italian bonds

U.S. stocks rose, rebounding from the worst drop since November, as data on housing and consumer confidence bolstered optimism in the economy. European shares slid with Italy’s bonds as the nation’s election stalemate spurred concern the debt crisis will worsen.

The Standard & Poor’s 500 Index added 0.6% at 4 p.m. in New York after the U.S. gauge slid 1.8% yesterday. The Stoxx Europe 600 Index dropped 1.3% with volume 27% greater than the 30-day average. Italy’s FTSE MIB Index fell 4.9%, the most since April, and 10-year bond yields jumped 41 basis points to 4.9%. The euro was little changed at $1.3063 after plunging 1% yesterday. Ten-year Treasury yields increased two basis points to 1.88% after declining for four straight days.

U.S. equities recovered after plunging yesterday as early projections released after European markets closed suggested Italy’s election would lead to a hung parliament and another vote. Democratic Party leader Pier Luigi Bersani, having campaigned to maintain budget rigor, won control of the lower house and not the Senate. Federal Reserve Chairman Ben S. Bernanke defended the central bank’s unprecedented asset purchases, while reports on house prices, new-home sales and consumer sentiment beat economists’ estimates.

“The economic data suggests that there’s further healing going on in the housing market,” Tom Wirth, who helps manage $1.6 billion as senior investment officer for Chemung Canal Trust Co., in Elmira, New York, said in a telephone interview. “On a global basis, I don’t understand what’s going on in Italy. I think we’ll get beyond that and move forward. If bond yields continue rise, that may weigh on the market though.”

Market Leaders

PulteGroup Inc. and KB Home paced gains among homebuilders. Home Depot Inc. rallied as it raised its dividend and approved a $17 billion share buyback after profit beat analysts’ estimates. Macy’s Inc., the second-largest U.S. department-store chain, gained after forecasting earnings that beat projections.

Home prices in 20 U.S. cities rose in the 12 months to December by the most in more than six years, with the S&P/Case- Shiller index of property values increasing 6.8% from December 2011, the biggest year-to-year gain since July 2006. The median projection of 30 economists surveyed by Bloomberg called for a 6.6% advance. Nineteen of 20 cities showed gains.

Purchases of new homes in the U.S. jumped in January to the highest level since July 2008, showing the industry will keep adding to growth in the economy. Sales, tabulated when contracts are signed, surged 15.6% to a 437,000 annual pace, exceeding the highest forecast in a survey of economists.

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