Stocks rallied, with the Standard & Poor’s 500 Index rebounding from its lowest level of the month, and Treasuries fell as U.S. housing starts topped economists’ estimates and German business confidence unexpectedly grew.

The Standard & Poor’s 500 Index surged 3 percent to 1,241.21 at 4 p.m. in New York and the Dow Jones Industrial Average jumped 335.66 points, or 2.9 percent, to 12,101.92, the biggest gains since Nov. 30 for both. Spain’s government bonds stayed higher as the nation sold 5.64 billion euros ($7.4 billion) of Treasury bills. The yield on the 10-year U.S. Treasury note advanced 11 basis points to 1.92 percent, with the dollar weakening versus all 16 of its most-traded peers. Oil gained 3.6 percent and the GSCI index of 24 commodities climbed for a second day.

U.S. builders broke ground in November on the most houses in over a year, a sign that the market is stabilizing heading into 2012. Federal Reserve Bank of Richmond President Jeffrey Lacker predicted the U.S. economy will grow at least 2 percent next year. German business confidence unexpectedly rose for a second month in December, according to the Ifo institute.

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