NEW YORK (CNNMoney.com) -- Stocks rallied Monday after FedEx's improved forecast and a better-than-expected housing market report tempered worries about the economic outlook.
Both the Dow and Nasdaq are now positive for the year, while the S&P 500 stands roughly where it stood at the end of 2009. All three major gauges had rallied soundly through late April, sold off through the end of June and have recovered in July.
Stocks gained in the morning and built on those gains as the session wore on, with investors scooping up a variety of shares. 29 of 30 Dow shares gained, led by oil stocks Exxon Mobil (XOM, Fortune 500) and Chevron (CVX, Fortune 500).
"The new home sales was a bright point but it was really FedEx's earnings and outlook that gave the market some buoyancy," said Matthew Kaufler, equity market strategist at Federated Clover Investment Advisors.
"The company represents a broad take on the economy and that's given investors some optimism today," he said.
But the gains also reflect the recent more positive tone to the market, said Stephen Goldman, market strategist at Weeden & Co.
Stocks slid in the second quarter as investors factored in a slower pace of recovery for the economy. But July has been a strong month as market pros anticipated improved quarterly results, a development that has played out so far.
Goldman said that the market is currently in a "reflex rally" following the selling in the second quarter, in which the major gauges lost more than 15% off the highs and flirted with a bear market -- a plunge of at least 20% off the highs.
"We're still going to see choppy trading after this rally fades out," Goldman said. "The economy is fragile and while it's not going to be a double-dip recession, growth is still going to be slow."
FedEx: Package shipper FedEx (FDX, Fortune 500) lifted its fiscal first-quarter earnings-per-share guidance to a range of $1.05 to $1.25, from 58 cents per share a year ago. Analysts are currently expecting earnings of $1.10 per share, according to Thomson Reuters. The company also boosted its forecast for fiscal year 2011, citing improved demand particularly for international shipments.
Like UPS (UPS, Fortune 500), FedEx is seen as a proxy for the economy, due to the nature of its business. Last week, UPS reported better-than-expected quarterly sales and earnings and also boosted its full-year forecast.
FedEx gained over 5.6% and UPS gained 1.2%.
Housing: New home sales rose to a seasonally adjusted annual unit rate of 330,000 in June, bouncing from a revised 267,000 unit rate in May, the lowest reading on record, dating to 1963. Sales were expected to rise to 310,000, according to a consensus of economists surveyed by Briefing.com.
While the pace was an improvement from the previous month, it was still the second-lowest on record, reflecting the end of the homebuyer tax credit. The slow pace also reflects the slow speed of the economic recovery.
Quarterly results: Roughly 157 major companies, or 31% of the S&P 500, reports results this week. Standouts include Dow companies Boeing (BA, Fortune 500), DuPont (DD, Fortune 500), Exxon Mobil (XOM, Fortune 500), Chevron (CVX, Fortune 500) and Merck (MRK, Fortune 500).
Also, BP (BP) reports on Tuesday, providing the first snapshot of the company's performance during the quarter in which the oil spill began. Separately, BP CEO Tony Hayward will step down in October and be offered a job with the company's joint venture in Russia, according to published reports Monday.
World markets: European markets rose as investors mulled the results of the bank stress tests released after European markets closed Friday. Britain's FTSE 100 rose 0.7%, Germany's DAX rose 0.5% and France's CAC 40 added 0.8%.
Asian markets ended the session higher, with Japan's Nikkei index up 0.8%, the Hong Kong Hang Seng up 0.2% and the Shanghai Composite up 0.7%.
Currencies: The euro fell versus the dollar, giving up earlier gains, while the dollar gained versus the Japanese yen.
Commodities: U.S. light crude oil for September delivery fell 6 cents to $78.92 a barrel on the New York Mercantile Exchange.
COMEX gold for August delivery fell $2.70 to $1,185.10 an ounce.
Bonds: Treasury prices fell, boosting the yield on the 10-year note to 3.00% from 2.99% late Friday. Debt prices and yields move in opposite directions.
Market breadth: Breadth was positive. On the New York Stock Exchange, winners beat losers by almost three to one on volume of 470 million shares. On the Nasdaq, advancers beat decliners by over two to one on volume of 1.22 billion shares.
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