Traders Gerard Farco, left, and Richard Cohen, right. work on the floor of the New York Stock Exchange Tuesday, Dec. 20, 2011. Stocks are surging after the opening bell following encouraging signs out of Europe and a jump in apartment building in the U.S. (AP Photo/Richard Drew)
NEW YORK (AP) — Stocks are surging in early trading Tuesday following encouraging signs out of Europe and a jump in apartment building in the U.S.
German business and consumer confidence rose unexpectedly in December, and the Spanish government pulled off a successful debt auction. Both eased worries about Europe’s debt crisis.
The Dow Jones industrial average jumped 273 points, or 2.3 percent, to 12,038 as of 11 a.m. Eastern time. It fell 100 points the day [auth] before. Caterpillar Inc. rose 3.5 percent, the largest gain of the 30 Dow stocks.
Borrowing costs for the Spanish government plunged at an auction of short-term debt, a sign that investors are becoming more confident in the country’s ability to pay it back.
“Spain has plenty of problems, large debts and budget deficits,” said Sam Stovall, chief equity strategist at S&P Capital IQ. “So when we see debt auctions go much better than expected it’s very encouraging.”
Spain raised €5.6 billion ($7.3 billion), much more than its goal of €4.5 billion. Investors demanded an interest rate of only 1.74 percent to lend to the government for three months, a steep fall from the 5.1 percent at an auction in November.
The Standard & Poor’s 500 index rose 30 points, or 2.6 percent, to 1,236. Energy and materials stocks made the largest gains.
The Nasdaq composite index rose 69, or 2.7 percent, to 2,593.
Europe’s major stock markets rose broadly. Germany’s DAX soared 2.9 percent. France’s CAC-40 jumped 2.6 percent.
The Commerce Department said 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.
The report sent housing stocks sharply higher. PulteGroup Inc. jumped 7.8 percent. D.R. Horton Inc. Lennar Corp. each rose 5 percent.
Stovall said the housing report was another piece of evidence that the U.S. will avoid slipping into another recession soon. “It’s great news,” he said.
In corporate news,
— General Mills Inc. dropped 2.3 percent after reporting that its quarterly profit sank 28 percent. The maker of Cheerios and Yoplait yogurt blamed higher costs for ingredients and packaging for pinching profit margins.
— AT&T Inc. rose 1 percent after the company abandoned its bid late Monday to acquire the wireless provider T-Mobile USA. Sprint Nextel Corp. rose 3 percent. Sprint, the No. 3 wireless carrier, had opposed the deal.
— Red Hat Inc. plunged 8 percent after the software company forecast revenue that was short of what analysts were expecting. Red Hat provides support to business users for the freely distributed Linux operating system.