Dow average returns to 5-year high as euro, Italian bonds rally

Stocks rallied, sending the Dow Jones Industrial Average to the highest since October 2007, as Italy sold debt amid political turmoil and U.S. data bolstered confidence in the world’s largest economy. The euro rebounded from a seven-week low and Italian 10-year bonds gained

The Dow added 171.83 points to 14,071.96 and the Standard & Poor’s 500 Index climbed 1.3 percent to 1,516.78 as of 3:10 p.m. in New York as a two-day rally erased its 1.8 percent slump on Feb. 25. The euro appreciated 0.5 percent to $1.3126 while Italy’s 10-year bond yield dropped nine basis points to 4.81 percent after jumping 41 points yesterday. The Nikkei 225 Stock Average capped its worst two-day drop since 2011. Gasoline and gold led commodities lower. Ten-year Treasury yields rose two basis points to 1.90 percent.

Italy sold 6.5 billion euros ($8.5 billion) of five- and 10-year bonds in its first auction following inconclusive election results that pushed yields to a four-month high yesterday. Federal Reserve Chairman Ben S. Bernanke said recent increases in some interest rates may signal the economy is gaining vigor. Orders for U.S. durable goods excluding transportation gear climbed in January by the most in a year, while pending home sales increased more than forecast.

“The economic numbers have been pretty good,” Walter Todd, who oversees about $940 million as chief investment officer of Greenwood Capital Associates LLC in Greenwood, South Carolina, said in a telephone interview. “The rebound in housing will hopefully help the economy. The foundation is a lot stronger today. That tells me there’s still room for stocks to move higher.”

Market Movers

The S&P 500 has rallied 1.9 percent in two days, bringing it within about 3.2 percent from its October 2007 record. Today’s gain erased its 1.8 percent slump on Feb. 25, which was triggered by concern that the Italian elections will worsen the region’s debt crisis.

Among stocks moving today, Inc., the biggest online travel agency by market value, added 3.5 percent after revenue growth in international markets pushed profit past analysts’ estimates. Target Corp. slumped 1.1 percent as profit fell after the discount retailer had its worst holiday-season store sales performance in four years. First Solar Inc., the world’s largest maker of thin-film solar panels, tumbled 13 percent after saying its “expected revenue” fell 15 percent last year.

U.S. bookings for equipment meant to last at least three years minus demand for things such as aircraft, which is often volatile, climbed 1.9 percent, exceeding the median forecast of economists surveyed by Bloomberg and the most since December 2011, Commerce Department data showed. Total orders dropped more than projected, reflecting the biggest slump in defense bookings in a decade.

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