Stocks surge on housing, Europe reports

Encouraging signs out of Europe and a surprisingly strong report on the U.S. housing market drove the Dow Jones industrial average up more than 300 points yesterday. It was the best day for stocks this month.

The Spanish government pulled off a successful debt auction, and gauges of business and consumer confidence in Germany rose unexpectedly. Both helped ease worries about Europe's debt crisis.

Europe's major stock markets also climbed.

Also, the Commerce Department said Tuesday builders broke ground on 685,000 new homes last month, a 9.3 percent jump from October. That's the highest level since April 2010. Building permits, a gauge of future construction, increased 5.7 percent, spurred by a jump in apartment permits.

Sam Stovall, chief equity strategist at S&P Capital IQ, said the surge in housing construction suggested the United States will avoid slipping into another recession soon. "It's great news," he said.

The Dow gained 337.32 points, or 2.87 percent, to close at 12,103.58. It lost 100 points the day before.

The gains held Tuesday afternoon even after the U.S. House of Representatives rejected a plan to extend a cut in Social Security taxes. Unemployment benefits for 2 million people are also at risk.

The Standard & Poor's 500 index gained 35.95 points, or 2.98 percent, to 1,241.30. Only six stocks in the index fell. The Nasdaq composite index rose 80.59, or 3.19 percent, to 2,603.73.

Analysts cautioned that recent big rallies in the stock market have been quick to fade as traders seize the chance to sell stocks and lock in gains. "If you're selling into rallies," said Quincy Krosby, Prudential Financial's market strategist, "it means people want out."