U.S. stock investors on Monday fixated on housing to gauge economic growth going forward, with earnings from a home-improvement chain helping boost sentiment along with improving spirits among homebuilders.

“Housing is a leading indicator of economic activity, and many see the sector as leading the economy in and out of recession,” T.J. Marta, a fixed-income strategist for Marta on the Markets LLC, wrote in a research note.

The market Monday received the results of the National Association of Home Builders/Wells Fargo Housing Market Index for May, which rose to 16 from 14 in April.

“Confidence in the much beleaguered home-building industry is up yet again. But, there are a vast array of issues facing the housing market that will serve to mute any recovery,” said Dan Greenhaus, an analyst with Miller Tabak & Co.

Analysts at Action Economics, who had expected the May reading to come in at 14, identical to its standing in April, said the rise adds to the “tentative evidence that the housing market has formed a bottom.”

On Tuesday, the Commerce Department will report housing-starts data for April, with the tally expected to rise slightly to 523,000.

“Remember that an annual rate of 700,000 homes is destroyed each year, so homebuilders are still underwater, as it were. A low number is good for inventory reduction,” said Marc Pado, U.S. market strategist, Cantor Fitzgerald.

Financials and energy shares led gains after results from Lowe’s Cos. Inc. bolstered investor sentiment. The Dow Jones industrial average jumped 165.11 points, or 2 percent, to 8,433.75. The S&P 500 Index added 17.31 points, or 2 percent, to 900.19, while the Nasdaq Composite advanced 30.64 points, or 1.8 percent, to 1,710.78.

Shares of Lowe’s jumped more than 9 percent, with analysts also looking for a smaller-than-expected profit decline from Home Depot Inc., which reports its quarterly results on Tuesday.

Shares of Dow component Home Depot advanced more than 6 percent.

Residential and commercial real estate stocks pulled higher for a fourth straight session. The iShares Dow Jones U.S. Home Construction Index Fund, an exchange-traded fund tracking homebuilders, gained 6 percent, while the iShares Dow Jones U.S. Real Estate Index Fund also traveled 6 percent higher.

(c) 2009, MarketWatch.com Inc. Source: McClatchy-Tribune Information Services.