NEW YORK — Investors rushed back into stocks Thursday as profits at a handful of companies indicated the economy might be gaining strength.
Homebuilders and retailers led a broad rally. The Dow Jones industrial average surged 173 points after four days of losses. The price of government debt jumped after an auction drew strong demand.
The day began with better-than-expected earnings reports. Lennar Corp.’s orders for new homes jumped 63 percent during the second quarter, and its revenue beat expectations.
And retailers rose after a report from Bed Bath & Beyond Inc. The home-furnishings store said its fiscal first-quarter earnings climbed 14 percent as sales increased after the liquidation of rival Linens ‘N Things.
Stocks extended their gains after Federal Reserve Chairman Ben Bernanke fended off accusations before a House committee that he pressed Bank of America Corp. to acquire Merrill Lynch in a deal that cost taxpayers $20 billion. Analysts said his handling of the questions made it less likely he would resign before his term expires early next year.
The third successful Treasury auction of the week helped boost confidence that Washington will be able to raise enough money to fund its economic-recovery programs. Investors also applauded the Fed’s announcement that it would let expire some of the emergency lending programs it set up last fall as the financial crisis intensified.
The upbeat news helped traders look past unexpected increases in claims for unemployment benefits. Traders had been expecting a drop. Investors have been dissecting economic and corporate data for signs of whether the economy is starting to recover or whether a rally that began in March was premature.
The Dow rose 172.54, or 2.1 percent, to 8,472.40, after falling 40 points in the early going. It was the biggest point and percentage gain for the blue chips since June 1, though the Dow is still down 67 points for the week.
The broader Standard & Poor’s 500 index rose 19.32, or 2.1 percent, to 920.26. The gain pushed the index back into the black for the year. The Nasdaq composite index rose 37.20, or 2.1 percent, to 1,829.54.
