A raft of positive economic news boosted investor sentiment on Tuesday, and the institution that rocked world markets yesterday, the People's Bank of China, allayed traders' fears somewhat with reassuring comments about keeping interest rates "reasonable." The market rallied as a result, with the Dow Jones industrial average gaining 102 points to close at 14,761. The S&P 500 added 15 to end at 1,588, and the Nasdaq rose 27 to 3,348.
The first encouraging number showed that orders for durable manufactured goods rose more than expected in May -- commercial aircraft for the most part, but also computers, communications equipment, machinery and metals -- suggesting increased business activity.
Then the S&P/Case-Shiller index of home prices in 20 cities recorded its largest increase in seven years in April, and existing home sales hit their highest level in five years in May. On top of these happy housing sector developments, the Conference Board's consumer confidence gauge rose to 81.4 in June, up from 74.3 in May, surpassing estimates of 75.4.
Some stocks and companies that made news on Tuesday:
Walgreen's (WAG) third quarter earnings were up 16 percent but still missed Wall Street forecasts, sending the share price down more than 4.8 percent. Troubling signs like uninspired non-pharmacy sales turned off investors, and the earnings jump was largely due to the company's weak performance of one year ago, after a business split. But Walgreen's stock was up 30 percent for the year before Tuesday.
Barnes & Noble's (BKS) sales plummeted, and its Nook e-book device lagged behind competitors by Amazon (AMZN) and Apple (AAPL), causing a net loss more than twice as large as last year's. As a consequence, the company announced, it will stop making its own Nook color touchscreen tablets, finding a partner to take over that aspect of manufacturing (while continuing to make the basic, black-and-white display devices in house). "We know this is a sizable change from our existing strategy," CEO William Lynch conceded. The bookseller's stock sank more than 17 percent, to $15.61.
Carnival (CCL) rose almost 1.6 percent after naming a new CEO, board member Arnold Donald. Former chief executive Mickey Arison was ousted following a year of accidents and bad publicity.
Tomorrow brings first-quarter GDP at 8:30 a.m. ET. The consensus forecast is a growth rate of 2.4 percent, the same as the previous quarter's.
The Associated Press contributed to this report.
9 Numbers That'll Tell You How the Economy's Really Doing
Closing Bell: Strong Economic Data Lift Stocks
The gross domestic product measures the level of economic activity within a country. To figure the number, the Bureau of Economic Analysis combines the total consumption of goods and services by private individuals and businesses; the total investment in capital for producing goods and services; the total amount spent and consumed by federal, state, and local government entities; and total net exports. It's important, because it serves as the primary gauge of whether the economy is growing or not. Most economists define a recession as two or more consecutive quarters of shrinking GDP.
The CPI measures current price levels for the goods and services that Americans buy. The Bureau of Labor Statistics collects price data on a basket of different items, ranging from necessities like food, clothing and housing to more discretionary expenses like eating out and entertainment. The resulting figure is then compared to those of previous months to determine the inflation rate, which is used in a variety of ways, including cost-of-living increases for Social Security and other government benefits.
The unemployment rate measures the percentage of workers within the total labor force who don't have a job, but who have looked for work in the past four weeks, and who are available to work. Those temporarily laid off from their jobs are also included as unemployed. Yet as critical as the figure is as a measure of how many people are out of work and therefore suffering financial hardship from a lack of a paycheck, one key item to note about the unemployment rate is that the number does not reflect workers who have stopped looking for work entirely. It's therefore important to look beyond the headline numbers to see whether the overall workforce is growing or shrinking.
The trade deficit measures the difference between the value of a nation's imported and exported goods. When exports exceed imports, a country runs a trade surplus. But in the U.S., imports have exceeded exports consistently for decades. The figure is important as a measure of U.S. competitiveness in the global market, as well as the nation's dependence on foreign countries.
Each month, the Bureau of Economic Analysis measures changes in the total amount of income that the U.S. population earns, as well as the total amount they spend on goods and services. But there's a reason we've combined them on one slide: In addition to being useful statistics separately for gauging Americans' earning power and spending activity, looking at those numbers in combination gives you a sense of how much people are saving for their future.
Consumers play a vital role in powering the overall economy, and so measures of how confident they are about the economy's prospects are important in predicting its future health. The Conference Board does a survey asking consumers to give their assessment of both current and future economic conditions, with questions about business and employment conditions as well as expected future family income.
The health of the housing market is closely tied to the overall direction of the broader economy. The S&P/Case-Shiller Home Price Index, named for economists Karl Case and Robert Shiller, provides a way to measure home prices, allowing comparisons not just across time but also among different markets in cities and regions of the nation. The number is important not just to home builders and home buyers, but to the millions of people with jobs related to housing and construction.
Most economic data provides a backward-looking view of what has already happened to the economy. But the Conference Board's Leading Economic Index attempts to gauge the future. To do so, the index looks at data on employment, manufacturing, home construction, consumer sentiment, and the stock and bond markets to put together a complete picture of expected economic conditions ahead.