NEW YORK — The stock market bounced back Tuesday on signs of recovery in Europe’s economy and strong earnings reports.
The Dow Jones industrial average ended the day 99.22 points higher at 13,979.30, erasing a large part of its loss from Monday. The index traded above 14,000 during the day before falling back in the last hour.
The Standard & Poor’s 500 gained 15.59 points to 1,511.29. The Nasdaq composite rose 40.41 points to 3,171.58.
Rising stocks outnumbered falling ones two to one on the New York Stock Exchange. Consolidated volume was average at 3.5 billion shares.
The rise follows two days of whiplash. On Friday, the index gained 149 points, closing above 14,000 for the first time since 2007. On Monday, the Dow dropped 129 points, its worst sell-off of the year, as fears about Europe’s finances resurfaced.
The Dow is now 185 points below the record high of 14,164 it reached on Oct. 9, 2007.
After strong gains for stocks this year, investors are wondering whether they should sell now, or wait and see whether the rally has legs, said Brad Reynolds, chief investment officer at LJPR, Inc.
“The market is extremely skittish right now,” Reynolds said. “That’s why we’re seeing such big moves.”
Tuesday’s advance was driven by a measure of manufacturing and service businesses in Europe that rose to a 10-month high January. New data also showed that U.S. home prices rose in Decemberat the fastest pace in more than six years.
Estee Lauder rose $3.66, or 6 percent, to $64.71 after reporting earnings that beat analysts’ expectations. Profits surged 13 percent at the beauty products company as sales in the U.S. and emerging markets rose. Computer Sciences Corp., an information technology services company, was the biggest gainer in the S&P 500. Its shares rose $3.84, or 9.2 percent, to $45.75.
Stocks have gotten off to astrong start this year. The Dow advanced 5.8 percent in January, its best start to the year since 1994, according to data compiled to S&P Dow Jones indexes. The S&P 500 rose 5 percent last month.
Lance Roberts, chief economist at Streettalk Advisors in Houston, said that’s related more to the Federal Reserve’s commitment to keep money cheap than to company performance. If earnings are beating estimates, he said, it’s largely because expectations were so low.
“If you lower the hurdles enough, companies can get over them,” Roberts said.
The fact that individual investors are starting to return to stocks, as they have in recent weeks, is another sign that the market is due for a correction, Roberts and other analysts have said.
Traders sold bonds as they moved money into stocks. The yield on the 10-year Treasury note, which moves inversely to its price, climbed four basis points to 2 percent.
Shares of Archer Daniel Midland, a company that makes food ingredients and animal feed, gained 94 cents, or 3.3 percent, to $29.38 after its earnings jumped in the last quarter after a restructuring.
Business, Pages 26 on 02/06/2013