Monthly Archives: May 2009

Gas, Oil Prices Hit New High For Year; Kitsap Gas at $2.61 Today Gas at

COLUMBUS, Ohio (AP) — Oil and gasoline prices hit a new high for the year Wednesday despite expectations that OPEC will not cut production again and more bad news arrived for the nation’s automakers.

Benchmark crude for July delivery rose $1 to settle at $63.45 a barrel on the New York Mercantile Exchange. Prices haven’t been that high since early November.

Retail gasoline prices, which are up 19 percent in the past month, rose 0.9 cents overnight to $2.434 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. Prices are now 10 cents higher than a week ago and 38.4 cents a gallon higher than a month ago. It’s also a high for the year.

There were signs of optimism about the economy, which could lead to a rebound in demand for energy.

About 74 percent of the forecasters in a survey by the National Association for Business Economics expect the recession, which started in December 2007, to end in the third quarter. Another 19 percent predict the turning point will come in the final three months of this year and the remaining 7 percent believe the recession will end in the first quarter of 2010.

Oil prices dipped below $35 a barrel as recently as March.

Many experts say that fundamentally, there is little reason for the recent price spikes and that consumers should expect related costs to come down before the summer is over.

Major U.S. industries continue to struggle and on Wednesday, a bankruptcy filing by General Motors Corp. appeared inevitable.

Jim Ritterbusch of Ritterbusch and Associates said gasoline prices could be back down to nearly $2 a gallon by the end of summer.

“Demand is going to remain weak, and we’ve got plenty of excess refining capacity to crank up production,” he said.

OPEC members gathered in Vienna before a meeting on Thursday. Saudi Arabian Oil Minister Ali Naimi has said the Organization of Petroleum Exporting Countries is unlikely to add to 4.2 million barrels a day of production cuts the group has announced since September.

He said that oil prices would likely reach around $75 a barrel by the end of the year on the back of growing demand in Asia.

OPEC has cut down on the oil it produces to combat huge surpluses in supply. By some estimates, there are 100 million barrels of oil afloat at sea in tankers.

Many experts expect more buildups in storage warehouses will be revealed in a government report Thursday.

In other Nymex trading, gasoline for June delivery rose 3.93 cents to settle at $1.8917 a gallon and heating oil rose 1.64 cents to settle at $1.5617 a gallon. Natural gas for July delivery fell less than a penny to settle at $3.638 per 1,000 cubic feet.

In London, Brent prices rose 91 cents to $62.15 a barrel on the ICE Futures exchange.

Wednesday Stocks Fall; Now at 8,380

NEW YORK (AP) — Wall Street’s rally is going back on hold as investors worry about how much the government is borrowing.

Stocks turned lower Wednesday afternoon, sending major indexes down about 1 percent, after trading mixed earlier. Prices for the benchmark 10-year Treasury note slumped, driving its yield up to 3.66 percent from 3.55 percent late Tuesday.

The drop in bond prices followed an auction of $35 billion in five-year notes, part of the $101 billion in debt the government is issuing this week. Even though the auction itself was strong, traders said investors are speculating that demand could weaken as the government issues massive amounts of debt to fund its financial and economic rescue programs.

The market’s unease came a day ahead of an auction of $26 billion in 7-year notes.

In addition to raising borrowing costs for the government, rising yields on Treasury debt could hamper an economic recovery since they are used as benchmarks for certain consumer loans such as home mortgages. Higher rates on those kinds of loans could prolong a recovery in the battered housing market.

“Stocks are following bonds,” said John Brady, senior vice president of global interest rate products at MF Global. “Will the economy grow and expand vigorously in the face of sustained higher interest rates?”

In late afternoon trading, the Dow Jones industrial average fell 107.52, or 1.3 percent, to 8,365.97. The broader Standard & Poor’s 500 index fell 9.83, or 1.1 percent, to 900.50, and the technology-laden Nasdaq composite index fell 9.56, or 0.6 percent, to 1,740.87.

On Tuesday, stocks soared on the Conference Board’s surprisingly high reading of consumer confidence. The May index was the highest since September. Consumer sentiment does not always correspond to consumer spending, but the data nevertheless fueled investors’ hopes for an economic rebound later this year.

The Dow is 29.4 percent above the lows it reached in early March, but still 40.2 percent below the record high it hit in October 2007.

Stocks had been jittery after a big advance Tuesday. General Motors Corp. said not enough bondholders agreed to swap their debt for company stock, meaning the automaker is almost certainly headed for bankruptcy protection.

GM has until Monday to either finish restructuring outside of court or file for Chapter 11. The announcement dampened the mood of investors who had grown more optimistic about the economy after the consumer confidence report.

“While consumer confidence looking forward is improving, the reality is the economy is still very weak,” said Alan Gayle, senior investment strategist at RidgeWorth Capital Management.

The prospect of a GM bankruptcy also made it more likely that the company would be plucked from among the 30 stocks that make up the Dow industrials. The price of a stock factors into its weighting in the Dow so GM’s low share price means it hasn’t been dragging on the blue chips lately. But its tumble has hurt the index as GM shares fell from as high as $18.18 last June.

GM fell 21 cents, or 14.6 percent, to $1.23 as the company inched toward bankruptcy.

Many investors have been expecting GM to enter Chapter 11 for some time, but the reality of it happening could still deal Wall Street a psychological blow. Any remaining value in the shares, which are currently trading just above $1, would be wiped out.

Some analysts say the market should be able to withstand an eventual GM bankruptcy filing. Mark Coffelt, portfolio manager at Empiric Funds, thinks Wall Street’s recovery since hitting 12-year lows in early March leaves stocks better suited to shrug off GM’s troubles.

“The market has come a long way in a short period. I would expect it to settle out a little bit,” he said, predicting more back-and-forth days rather than more big gains in a short period.

Investors on Wednesday didn’t find relief in a bigger-than-expected increase in home sales because a rise in inventories fanned worries that homes languishing on the market would continue to crimp the economy by hurting consumers and banks that hold mortgages.

The National Association of Realtors said sales of previously occupied homes rose from March to April as buyers hunted for bargains. Sales rose 2.9 percent to an annual rate of 4.68 million last month. But the trade group also said the number of unsold homes on the market at the end of April rose almost 9 percent to nearly 4 million. That’s a 10-month supply at the current sales pace.

Some analysts worry that rising prices could prompt homeowners who had been holding off to put their homes on the market. The increase in available homes could short-circuit a recovery in prices and trip up the economy’s recovery.

In corporate news, agricultural products maker Monsanto Co. fell $4.39, or 5.2 percent, to $80.86 after saying it expects to meet the low end of its fiscal 2009 earnings forecast.

Flash-memory maker SanDisk Corp. renewed a licensing agreement with South Korea’s Samsung Electronics Co. SanDisk jumped $2.11, or 15.5 percent, to $15.69.

In other trading, the Russell 2000 index of smaller companies fell 5.25, or 1.1 percent, to 495.06.

About three stocks fell for every two that rose on the New York Stock Exchange, where volume came to 786.5 million shares compared with 809.9 million shares about the same time Tuesday.

The dollar was mixed against other major currencies. Gold prices fell.

Light, sweet crude rose 94 cents to $63.39 per barrel on the New York Mercantile Exchange.

Overseas, Britain’s FTSE 100 rose 0.1 percent, Germany’s DAX index rose 0.3 percent, and France’s CAC-40 added 0.8 percent. Japan’s Nikkei stock average rebounded 1.4 percent.

The Unraveling of Westsound

Risky loans and possible mispresentation of them to the secondary market got the Bremerton-based bank in trouble.


Contractor Jerry Becker of Bremerton is 

$1.5 million in debt and close to ruin.

He blames the late Westsound Bank for much of his misery.  

Becker had a long and “outstanding” relationship with the bank that the state seized on May 8. Over the years, he borrowed money to construct homes, develop land and build his business.   

But when the bank began its dive, and with suspicious regulators closely watching its every move, it stopped giving Becker draws on his loans.

Suddenly, he couldn’t pay his subcontractors or complete his projects. 

His livelihood screeched to a halt. His loans fells in arrears. He said he tried repeatedly to work with Westsound — he felt they could work it out as they always had — but the spigot was shut tight.

“They didn’t care. They didn’t want to talk with me,” Becker said.

The bank sued Becker in 2008 for several loans in default. He sued back for not giving him draws on his loans.

In the fallout, Becker has lost some of his properties, and collectors have taken away a motorhome. He has had to sell a truck and tools at a loss. He’s about to lose an excavator.

For Becker, and a lot of other contractors like him, it’s all but over.

“I have no option but to go bankrupt,” he said.

There are other victims.

The fall of Westsound has resulted in damaged reputations of those who began and ran the bank. It has brought stress to the former bank’s 93 employees, who don’t know if they’ll have jobs in the future.

It has shaken trust among community members in homegrown banks.

And then there are the investors who lost their money, many of them locals trying to do something good for Bremerton.

Westsound investor Rod Rodriguez of Chico lost several thousand dollars. He feels betrayed. Investment promoters led him to believe there was little risk, he said. He believed them, and admits he didn’t watch the falling stock price as closely as he might have.

“It’s not investing anymore; it’s gambling,” he said.

A Central Kitsap woman and longtime Kitsap resident who asked not to be identified lost $10,000. Her investment was to be part of her retirement.

“This board of seemingly astute Kitsap business people just frankly screwed up big-time,” she said. “And all of them, I hope, are feeling great agony, and their standing in the community needs to be affected.”

Hindsight is 20-20.

“The lessons learned are that any time an institution begins to emphasize growth and share price before loan administration and solid underwriting, you have a recipe for trouble,” said Brad Williamson, Washington Department of Financial Institutions’ director of banks. 

“And sadly, that appears to be what happened with Westsound Bank.”


High on the Idea of a New Local Bank

It was 1998 and the economy was steaming ahead. A group of prominent local businessmen led by banker Klaus Golombek believed a new local bank would help the community. Westsound Bank would be “a partner with small businesses to help them become more successful,” Golombek said then.

The bank’s organizing board included Lou Weir, Jim Lamb, Rod Parr, Pat Tucker, Louis Mentor, Bruce Christopherson, Ed Wilson, Brian McLellan, Leslie Krueger and Dean Reynolds.

Supporters raised about $4 million from 400 investors to start the bank, which opened on Pacific Avenue and Second Street in 1999.

But the seeds of the bank’s destruction may have already been sown.

Golombek, the bank’s first president and chief executive officer, left just 19 months later.

The majority of the board wanted the bank to grow very fast, Golombek said recently. He preferred slow and steady.

“I couldn’t control them,” he said.

“I can sit there till I’m blue in the face and say, ‘This isn’t going to work.’”

None of the surviving organizers would speak with the Kitsap Sun.

Dave Johnson was hired to replace Golombek, and the coming years seemed great for Westsound and its customers.

With home-appreciation rates rising 20 percent year after year, there seemed no end to the party. Westsound became a go-to bank for many local contractors like Becker. Many were overextended, but they were confident the economy would continue strong.

“They would loan money to anybody,” Becker said. 

Becker’s son-in-law, Matt Templeton, said he was able to get $1.3 million in loans from Westsound when he was only making $35,000 a year.

Westsound was confident, too. Its assets and deposits grew rapidly.

In 2006, Johnson announced record growth for the first half of the year. Assets increased
63 percent to $301 million. Loans were up 76 percent to $275 million. Deposits increased 62 percent to $274 million, and net income rose 84 percent to
$2 million.

Westsound moved up Pacific to bigger quarters and had offices throughout western Puget Sound and in Federal Way. 

To fuel even more growth, Westsound leaders decided to take the company public. The bank’s parent, WSB Financial Group, raised $41 million through an initial offering of common stock. Some 2.6 million shares were sold for between $16.50 and $19 apiece.

The push was on.


Westsound Hits the Wall

But the next year, the inflated housing market on which Westsound was so dependent began to crumble.

That provided a dangerous backdrop for what was about to happen.

In an internal review, Westsound cut 33 of 40-plus employees from its mortgage marketing arm and terminated Brett Green, executive vice president of sales and lending. At the time, Westsound said it was going to outsource loan marketing.

Soon after, the bank announced it was under investigation by the Federal Deposit Insurance Corp. and the state Department of Financial Institutions for possible fraud and violation of banking rules.

Front-and-center in the probe were 146 risky high-end home construction loans worth $90 million.

The result from the FDIC and DFI investigation remains out of reach of the public.

But this is known:

In a conference call to investors, Johnson said that the bank had issued loans that didn’t require full documentation of income, but merely stated income. But a secondary-market program by Countrywide Financial Corp., to which these loans were sold, required full documentation. 

Borrowers were making interest payments, but the bank could not demonstrate their ability to pay over the long haul.

Countrywide pulled its program, leaving Westsound without an exit strategy.

Most of the problem loans were made by one or two employees who were by then no longer with the bank. Many were made out of Westsound’s branch in Federal Way for fancy houses in King and Pierce counties. 

At the same time, a third party not employed by the bank was bringing new loan business to Westsound. He was getting the business from a Russian immigrant community across the water, those loan-holders told the Kitsap Sun. 

The loans might have had problems in that holders said they were going to occupy the homes being built, yet the homes sold soon after completion. 

The Countrywide program was for owner-occupied homes and offered more favorable terms than spec loans.

How that third-party person was compensated by the bank was also under question. 

Early last year, the FDIC and DFI slapped Westsound with a cease-and-desist order.

The order sharply criticized Westsound’s lending practices and stated that its board of directors had failed to provide adequate supervision. The board had many of the original bank organizers on it.

Johnson was forced out. He could not be reached by the Kitsap Sun.

Westsound was still allowed to make construction loans, but by that time, it was so deep in trouble, and the market was so bad, that its ability to operate was crippled.

During this time, local contractors like Becker complained they couldn’t even get the bank to return phone calls.

Soon, Terry Peterson was hired as the new president and CEO. His task was to turn the bank around.

But by the end of 2008, 40 percent of the bank’s loan portfolio was non-performing, according to the U.S. Securities and Exchange Commission. The bank suffered a $33 million loss that year, and its stock price had dropped precipitously.


A Nightmare
Finally Finishes

The weather on Friday, May 8, was clear, cold and sobering.

The parking lot in front of Westsound headquarters was full of rented vehicles. Throughout the afternoon, dozens of out-of-town employees from the FDIC and DFI shot in and out of the bank. A few confused customers wondered what was going on.

Later, Kitsap Bank President and CEO Jim Carmichael, flanked by three Kitsap Bank employees, entered the bank. 

It was official. The DFI, citing inadequate capital and liquidity, was taking possession of Westsound. Employees inside cried when told what was happening.

Kitsap Bank would assume $210 million in deposits and another $49 million in cash and securities. It would open all nine former Westsound’s branches on the following Monday as Kitsap Bank branches. 

Depositors’ accounts were safe.

The Friday handover was stone-cold tense, but orderly.

Many who had invested in Westsound lost their money. A $5 million settlement between Westsound and investors in October 2008 didn’t go far. 

Carmichael and Kitsap Bank were the only winners in this story.

A former FDIC examiner himself, Carmichael had managed to negotiate terms with the FDIC that catapulted his bank to the billion-dollar mark in terms of assets and placed it among the top 600 banks in the nation in size.

The FDIC had wanted Kitsap Bank to assume Westsound non-performing loans, as well, but Carmichael would have no part of it. The FDIC will bundle and sell off what it ended up with in the deal.

As for possible fraud or the breaking of banking rules by former Westsound employees, the FDIC does an investigation when every bank closes, a spokesman said. No word has been received that Westsound is an exception.

When asked if the FBI was investigating, a spokeswoman said she could neither confirm nor deny it.

Serious charges against individuals, at this point, cannot be ruled out.

Williamson, the DFI banks director, said, “If we were contemplating fines at this point, they probably already would have occurred.”

National Home Prices Drop to 2002 Levels

NEW YORK (AP) — National home prices are at levels not seen since the 2002 Winter Olympics, but a closer look at a housing index released Tuesday shows real estate is indeed local with some prices in certain cities falling to pre-2000 values.

The Standard & Poor’s/Case-Shiller National Home Price index reported home prices tumbled by 19.1 percent in the first quarter, the most in its 21-year history. Home prices have fallen 32.2 percent since peaking in the second quarter of 2006.

But in cities across the country home prices varied dramatically, depending on affordability, foreclosure activity and the local economy. The bottom may be in sight in some markets, but nationally home values are expected to decline — though at a slower pace — for the rest of the year.

“By our estimation, the composite 20-city index is perhaps two-thirds of the way through its ultimate total decline in this cycle,” according to Joshua Shapiro, chief U.S. economist for MFR Inc.

It’s hard to believe it could get much worse for homeowners in Detroit. Homes there are worth what they sold for in 1995. And while that’s good news for homebuyers, the implosion of the auto industry and economic fallout means fewer buyers have the money to qualify for a mortgage.

“I feel like houses here are free,” said Detroit area real estate agent Rose Marie Jouan with Re/Max Showcase Homes. Her house that she sold in 2004 for $200,000 is on the sales block, bank-owned, for $86,000.

In Phoenix and Las Vegas, where prices have plunged by half since their peaks, home values have receded to levels not seen since the beginning of the real estate boom. Phoenix prices are at early 2001 levels and Las Vegas values hover at mid-2002 prices.

Home values in Charlotte, N.C., Portland, Ore., and Seattle are steady at 2005 prices, the best showing of all 20 cities in the Case-Shiller report. All three were some of the last to fall into the housing slump.

The Case-Shiller report offered other hopeful signs the worst may be over for some cities. Denver prices posted an increase over February, while Dallas prices were flat.

Also, the rates of annual decline for the 10- and 20-city indexes slowed in March, the second straight month they didn’t set record price drops. The 20-city index fell by 18.7 percent from the year before and the 10-city index lost 18.6 percent.

Still, there are no signs home prices nationally have hit bottom.

“We see no evidence that a recovery in home prices has begun,” said David M. Blitzer, chairman of the S&P index committee.

All 20 cities showed monthly and annual price declines, with nine setting annual records. Fifteen cities posted double-digit drops and Phoenix, Las Vegas and San Francisco recorded declines of more than 30 percent.

Minneapolis posted a 6.1 percent decline from February to March, the biggest monthly drop on record for any metros in the indexes. Ron Peltier, chairman and chief executive of HomeServices of America, attributed the drop to a jump in distressed sales in March.

Economists will get a look at April housing data Wednesday when the National Association of Realtors releases sales data for previously owned homes, and on Thursday when the Commerce Department puts out numbers for sales of newly built homes. Economists surveyed by Thomson Reuters expect existing home sales to rise 2 percent from March to April, while new home sales are forecast to rise by 1.1 percent.

Tuesday Stocks Surge Nearly 200 Points on Consumer Confidence

Closed at 8,473


NEW YORK (AP) — Consumers’ good mood is spreading to Wall Street.

Stocks surged Tuesday after the Conference Board said consumer sentiment rose in May to the highest level since September. All the major stock indicators jumped more than 2 percent, including the Dow Jones industrial average, which gained 175 points.

The research group’s Consumer Confidence Index vaulted to 54.9 from 40.8, soaring past the 42.3 that economists surveyed by Thomson Reuters expected.

Investors watch the indicator for signs of whether consumers might start shopping more or making bigger purchases such as cars and homes. Spending by consumers makes up more than two-thirds of U.S. economic activity.

Jim King, chief investment officer at National Penn Investors Trust Co., said the improvement in consumer confidence surprised investors. With unemployment still high and expected to go higher, many market watchers thought the mood on Main Street would remain gloomy.

“The consumer confidence figure is one that no one really pinned a lot of hopes on as going higher,” he said.

Traders are seeing green on their screens on the first day back from a long weekend but the compressed week could still trip up the market. Data are due on home sales as well as the economy’s overall output in the first three months of the year, and investors will be eyeing General Motors Corp. as its June 1 restructuring deadline approaches.

In late afternoon trading, the Dow rose 182.31, or 2.2 percent, to 8,459.63. The Standard & Poor’s 500 index rose 20.61, or 2.3 percent, to 907.61, and the technology-laden Nasdaq composite index rose 52.57, or 3.1 percent, to 1,744.58.

The Conference Board’s report marked the second consecutive month of large gains in its measure of consumer confidence. Its previous report on April 28 helped reverse a slide in the market that day, and investors appeared heartened that the improving trend was continuing into May.

Stocks dependent on strong consumer spending jumped. Macy’s Inc. rose 55 cents, or 4.9 percent, to $11.74, while Best Buy Co. advanced $1.77, or 5 percent, to $36.95. Home builder KB Home rose 80 cents, or 5.5 percent, to $15.44, and DR Horton Inc. rose 46 cents, or 5 percent, to $9.47.

Tech stocks showed some of the biggest gains in part after an analyst raised her rating on Apple Inc. She contends the growth of the company’s iPhone device has been underestimated. Apple rose $7.767, or 6.3 percent, to $130.26.

Investors have been questioning whether the stock market’s massive two-month rally can be sustained given the continuing weakness in the global economy in areas like housing and unemployment. The Dow is up 26.4 percent from its 12-year low hit on March 9, but even with those gains it’s 41.6 percent below its peak in October 2007.

Bill Stone, chief investment strategist at PNC Wealth Management, said some money managers are forced to step in when the news is good just because they are afraid of being left behind and showing poor returns.

“You’ve still got a lot of people left that really don’t want to like this market but may eventually be forced,” he said. Stone is encouraged by the skepticism because it could help hold the rally in check.

After mixed economic data over the last couple weeks, as well as a huge number of stock offerings by banks, the market is likely to stay volatile in the coming weeks, said Steven Goldman, chief market strategist at Weeden & Co. “The market’s had a pretty huge gain here,” he said.

GM reversed an early slide after it outlined a deal with labor unions, rising 3 cents to $1.46. However the automaker has yet to reach a deal with its major bondholders and is facing a midnight deadline Tuesday for doing so.

In other trading, the Russell 2000 index of smaller companies rose 19.78, or 4.1 percent, to 497.40.

About five stocks rose for every one that fell on the New York Mercantile Exchange, where volume came to a light 940.1 million shares compared with 773.9 million shares at the same time Friday.

Bond prices fell, pushing the yield on the 10-year Treasury note up to 3.50 percent from 3.46 percent late Friday.

The dollar was mixed against other major currencies, while gold prices fell.

Light, sweet crude rose 78 cents to settle at $62.45 per barrel on the New York Mercantile Exchange.

Overseas, Britain’s FTSE 100 rose 1.1 percent, Germany’s DAX index rose 1.4 percent, and France’s CAC-40 rose 1.1 percent. Japan’s Nikkei stock average fell 0.4 percent.

Wednesday Stocks Open Higher as BofA Raises Capital

NEW YORK (AP) — Stocks are higher in early trading on news that Bank of America Corp. was able to raise billions of dollars in capital.

The bank said late Tuesday that in less than two weeks it had raised $13.47 billion through the sale of 1.25 billion shares of stock. Bank of America’s ability to raise cash is a welcome sign for traders still worried about how the bank will fare if consumers fall behind on more debt from mortgages to credit cards.

Investors are also awaiting testimony from Treasury Secretary Geithner before a Senate committee over the White House’s plan to steady the banking system.

The Dow Jones industrial average is up 55 at 8,530. The Standard & Poor’s 500 index is up 7 at 916, while the Nasdaq composite index is up 10 at 1,745.

Kitsap Jobless Rate Falls

By Rachel Pritchett

For the first time in nine months, Kitsap County’s unemployment rate has dropped.

The unadjusted rate for April was 8.3 percent, still very high for Kitsap County, but slightly lower than the adjusted 8.5 percent for March, according to the Washington Department of Employment Security.

March’s unemployment rate was the highest in Kitsap County in at least two decades.

Some 112,460 persons were employed in Kitsap County in April. About 10,230 persons were unemployed.

A year ago, when unemployment in Kitsap County stood at 4.4 percent, there were half as many unemployed people as there are now.

The Kitsap County unemployment rate has risen steadily since last September, when it was measured at 4.8 percent.

Washington’s unemployment rate did not rise in April, staying steady at 9.1 percent. The Seattle area fared better, at 7.9 percent.

“We don’t know what the future holds, but for now it’s great to see our unemployment rate holding steady,” said Employment Security Commissioner Karen Lee. 

The national unemployment rate was 8.9 percent for April. 

Monday stocks jump 235 points on renewed optimism

Closed at 8,504


NEW YORK (AP) — Reassuring news about housing and banking on Monday convinced investors to return to the stock market.

The Dow Jones industrial average shot up 235 points, its biggest daily point gain in over a month, and made up three-quarters of last week’s losses. All the major indexes rose about 3 percent.

A better-than-expected profit report from Lowe’s Cos., an uptick in homebuilder sentiment and positive comments from analysts about U.S. banks revived investors’ confidence in an economic rebound. Stocks fell sharply last week on worries that a recovery might be further off than hoped, interrupting a rally that has left the Standard & Poor’s 500 index up 34.5 percent since March 9.

Steep drops in home values have been at the heart of the economy’s troubles, slicing into consumers’ wealth and saddling banks with huge losses. Analysts believe that stability in the housing and banking industries are imperative for the economy to rebound.

“There’s a realization that things are going to get better,” said James Cox, managing partner at Harris Financial Group. “That’s the main theme of the market over the last couple of weeks.”

Despite Monday’s bounce, however, the market is expected to remain volatile as investors look for signs that the economy is actually recovering — not just slowing its descent.

At the start of the market’s upswing in March, signs of stabilization were enough to encourage investors to buy stocks. Linda Duessel, equity market strategist at Federated Investors, said the rally has been driven by “less bad” information.

“Probably, we’ll get bored with that as the months progress,” Duessel said. “We’ll need something better to move the market.”

According to preliminary calculations, the Dow rose 235.44, or 2.9 percent, to 8,504.08. That was the biggest point gain since a 246-point jump on April 9.

The S&P 500 index rose 26.83, or 3 percent, to 909.71, and the Nasdaq composite index rose 52.22, or 3.1 percent, to 1,732.36.