(Businessweek) Shares of major homebuilders rose with the broader markets Wednesday, helped by a government report that showed an uptick in spending on home construction in September and the Federal Reserve's decision to keep interest rates at historic lows.
While the broader markets gained more than 1 percent following Tuesday's rout on concerns about Europe, investors bought up homebuilder stocks.
Among the winners was PulteGroup Inc., a builder based in Bloomfield Hills, Mich. Shares rose 21 cents, or 4.2 percent, to $5.21. Shares of Miami-based Lennar Corp. added 63 cents, or 4 percent, rising to $16.42.
Earlier Wednesday, the Fed said it would keep a key short-term interest rate at the record low it's been since December 2008. The rate, which banks charge each other for overnight loans, is a key benchmark for many consumer loans. It has helped keep mortgage interest rates down, a key factor for the weak housing market.
The Fed also offered a rosier outlook for the economy. In a statement, the officials said the economy has strengthened and consumers stepped up spending over the summer. The job market remains weak and the debt crisis in Europe could have spillover effects here, but the recent growth appears to have stemmed fears that the U.S. would slide into a double-dip recession.
Separately, the Commerce Department on Tuesday said U.S. builders spent slightly more last month on home building. Private residential construction spending edged up 0.9 percent, the report said, while public construction project spending fell.
Homebuilders started projects in September at the fastest pace in 17 months, a hopeful sign for the economy. Most of the increase was driven by an increase in apartment construction, however, which shows that more people are renting rather than buying homes.
Nevertheless, while existing home sales for the year have been the worst in decades, sales of new homes rose in September after four straight monthly declines.
Also gaining in Wednesday trading were shares of luxury builder Toll Brothers Inc. of Horsham, Pa., which added 41 cents, or 2.4 percent, to $17.46. Red Bank, N.J.-based Hovnanian Enterprises Inc. gained 9 cents, or 6.9 percent, to $1.41. And Meritage Homes Corp. of Scottsdale, Ariz., rose 52 cents to $17.73.