Market Recap: Stocks Rebound as Investors Focus on Signs of Economic Strength

Markets closed up on Wall Street today: 

• Dow +1.10 percent
• S&P+1.06 percent
• Nasdaq +0.92 percent
• Oil +0.29 percent
• Gold -1.05 percent

On the commodities front: 

• Oil (NYSE:USO) climbed to $99.65 a barrel
• Gold (NYSE:GLD) falling to $1,547.60
• Silver (NYSE:SLV) climbed 1.78 percent to settle at $27.72

(Related: Oil Prices Could Stay Above $100 a Barrel Through 2012)

Today’s markets were up because:

1) Housing: The number of Americans signing contracts to buy homes rose in November to an 18-month high, offering yet another sign of a tentative recovery in the housing market. The National Association of Realtors’ Pending Home Sales Index, which is based on contracts signed in November, increased 7.3 percent to 100.1 — the highest level since April 2010. A reading of 100 is considered healthy. The report boosted shares of homebuilders, including Pulte, DR Horton, Masco, Lennar, and NVR Inc.

2) Employment: New jobless claims rose more than expected last week. The U.S. Labor Department’s weekly report on initial unemployment benefits applications showed claims to have risen by 15,000 to a seasonally adjusted 381,000 in the week ended December 24. However, the four-week moving average, considered to be a better measure of overall trends, fell 5,750 to 375,000, its lowest level since June 2008. Furthermore, the weekly initial claims figure remains below the 400,000 mark that is normally associated with an improvement in labor market conditions.

2) Italy: The European sovereign debt crisis has remained a focal point in the eyes of investors throughout the year, and market trends have been strongly linked to progress, or lack thereof, made toward effecting a solution to the debt crisis. So when Italy, the euro zone’s third-biggest economy, saw yields on long-term bonds decline today, one day after yields on short-term bonds were halved, it gave investors hope that Italy will survive the crisis.

However, the Italian bond market was buoyed by the European Central Bank’s new three-year liquidity measures. The ECB last week loaned European banks 489 billion euros in a bid to keep credit flowing to the euro economy, of which Italian lenders borrowed 116 billion euros. After today’s auction, the yield on the benchmark 10-year note climbed 12 basis points to 7.12 percent.

[Editor’s note: the above is a cross post that originally appeared on Wall St. Cheat Sheet.]