Stocks rise on housing, inflation data as Home Depot climbs

U.S. stocks advanced, after the Nasdaq Composite Index climbed to a 14-year high on Monday, as retailers rallied on better-than-projected earnings while data showed inflation pressures remain limited and housing starts jumped.

Home Depot Inc. gained 4.5 percent after earnings topped analysts’ estimates and the company raised its forecast. TJX Cos. and Dick’s Sporting Goods Inc. jumped more than 5.1 percent. Aeropostale Inc. advanced 12 percent after saying Julian Geiger has returned as CEO. An S&P index of homebuilders rose 1.8 percent to the highest in three weeks.

The Standard & Poor’s 500 Index advanced 0.3 percent to 1,977.94 at 10:24 a.m. in New York, bringing it within 0.5 percent of its all-time high. The Nasdaq Composite added 0.3 percent. The Dow Jones Industrial Average increased 55.71 points, or 0.3 percent, to 16,894.45. Trading in S&P 500 companies was 22 percent below the 30-day average for this time of the day.

“We keep hearing about Federal Reserve liquidity and how it’s going to put inflation through the roof, but inflation has been right in line,” Matt Maley, the Newton, Mass.-based equity strategist at Miller Tabak & Co. LLC, said via phone. “On the housing side, this was a little bit of a surprise.”

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The S&P 500 rose 0.9 percent on Monday as concern eased over the Ukraine crisis. The gauge fell as much as 3.9 percent from a record reached on July 24 amid growing concern over global conflicts from Ukraine to Gaza and Iraq. The benchmark index gained 1.2 percent last week as signs of a slowing global economy stoked bets central banks will leave interest rates near record lows for longer.

Jackson Hole

The Fed will release the minutes of its last gathering Wednesday, before central bankers meet in Jackson Hole, Wyoming. Fed Chair Janet Yellen and European Central Bank President Mario Draghi will be among the speakers at the annual symposium on monetary policy.

The Fed is watching economic data to help gauge adjustments to monetary stimulus. Yellen has said officials will keep its benchmark interest rate low for a “considerable time” after it ends its bond-buying program.

A report on Tuesday showed the cost of living in the U.S. climbed in July at the slowest pace in five months, indicating price pressures remain limited even as the economy picks up.

Inflation continues to run below the Fed’s target as sluggish global demand limits companies’ ability to charge customers more. Restrained increases give the central bank’s policy makers room to keep interest rates low well after the projected end of their bond-buying program in October.

Housing starts

Housing starts surged in July to the highest level in eight months, underscoring the recent pickup in builder optimism as the U.S. residential real-estate market gains some traction.

An S&P index of homebuilders gained 1.8 percent, after jumping 2.1 percent on Monday as a report showed industry confidence rose in August. D.R. Horton Inc. advanced 2.1 percent and KB Home increased 2 percent.

The Nasdaq Composite rallied 1 percent on Monday to its highest level since March 2000. The gauge ended the day 13 percent above its February low. The last time the measure closed this high, on March 31, 2000, it went on to sink 46 percent through the end of that year as the dot-com bubble burst.

Internet stocks

The Dow Jones Internet Composite Index and the Nasdaq Biotechnology Index closed Monday at the highest levels since March. Both indexes have recovered most of their losses from March and April, when investors sold off the best performers during the five-year bull market amid concern valuations had become too expensive.

The S&P 500 is trading at 17.8 times the reported earnings of its companies, near the highest level since 2010. The gauge is trading again above its average price for the past 50 days, after having plunged below it on July 31. The Dow is poised to close above its 50-day average for the first time this month.

Retailers had the biggest advance among 24 groups in the S&P 500 on Tuesday, climbing 1.5 percent.

Home Depot advanced 4.5 percent to $87.33. CEO Frank Blake has focused Home Depot on boosting sales from existing locations and investing in e-commerce, rather than opening new stores. Second-quarter revenue gained 5.7 percent to $23.8 billion, helped by improved weather and rising home prices that are spurring consumers to spend on renovations.

Retailers rally

TJX increased 6.6 percent to $57.47. The discount apparel company that owns T.J. Maxx and Marshalls raised its profit forecast after comparable-store sales grew faster than estimated. Dick’s Sporting Good added 5.1 percent to $45.73. The company beat second-quarter earnings projections, though it said promotions and advertising will weigh on profit in the rest of the year.

The results, together with the rosy outlook from Home Depot, fueled investor optimism after a series of disappointing retail earnings reports. Wal-Mart Stores Inc., the world’s largest retailer, posted stagnant U.S. same-store sales last week, marking the sixth straight period of no growth. That followed a report from the Commerce Department that retail sales were little changed in July, hampered by a lack of wage gains.

Bieber, Swift

Aeropostale rose 12 percent to $3.63 after saying Thomas Johnson stepped down as CEO and as a director. Geiger served as Aeropostale’s CEO from 1996 to early 2010 and was the top executive at Crumbs Bake Shop Inc., the cupcake chain that shuttered its stores last month, from late 2011 through 2013.

Rackspace Hosting Inc. increased 4.3 percent to $33.19. Hedge fund Blue Harbour Group LP, which owns 6.4 percent of the cloud-computing provider, said in a statement that it looks forward to a discussion on alternatives, including a standalone entity, to deliver shareholder value.

Elizabeth Arden Inc. plunged 25 percent to $14.71, the lowest level since 2010, after saying a decline in sales of celebrity fragrances was steeper than anticipated in the fourth quarter. Net sales dropped 28 percent from the prior year as Justin Bieber and Taylor Swift fragrances slumped.

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