Financial Watch

The index of U.S. leading indicators rose in March by the most in 10 months, a sign the economy will keep growing into the second half of the year.

The 1.4 percent increase in the New York-based Conference Board’s measure of the outlook for three to six months was more than anticipated and followed a revised 0.4 percent gain in February.

Manufacturers are ratcheting up production and factory workers are putting in longer hours as companies rebuild inventories and ship more goods overseas. Further improvement in the job market will help sustain the economy’s recovery from the worst recession since the 1930s.

The first-quarter reporting period kicks into high gear this week, even as investors continue to mull the ramifications of Goldman Sachs’ fraud charge and the latest batch of readings on the recovery.

News that the Securities and Exchange Commission (SEC) has charged Goldman Sachs (GS, Fortune 500) with fraud involving the way it marketed mortgage-backed securities sent stocks tumbling Friday at the end of a mixed week.

But even with Friday’s selloff, the Dow and Nasdaq managed to end higher for the week and have now ended higher in eight of the last nine weeks. The S&P 500 ended lower for the week, but has risen in seven of the last nine weeks.

Interest rates rose in the bond market Wednesday after a range of reports signaled that the economy is recovering.

Prices on most Treasurys fell, driving yields higher.

Demand for safety holdings like Treasurys fell after Federal Reserve Chairman Ben Bernanke said the economy is recovering. Economic reports and improved quarterly earnings at chipmaker Intel Corp. and the big bank JPMorgan Chase & Co. bolstered the sense that business conditions are getting better.

The yield on the benchmark 10-year Treasury note maturing in February 2020 rose after a three-day slide. The yield advanced to 3.87 percent in late trading from 3.82 percent Tuesday. Its price fell 11/32 to 98 1/32. The 10-year yield is linked to rates on mortgages and other consumer loans.

Federal Reserve Bank of Richmond President Jeffrey Lacker said the U.S. economy will probably expand at a moderate pace for the rest of this year as spending by consumers and businesses picks up.

The Labor Department’s report of 162,000 jobs added to payrolls in March was the “most encouraging sign” yet of a recovery, and the “risk of a pronounced decline in inflation has diminished substantially,” Lacker said yesterday in a speech in Morgantown, West Virginia.

Lacker stopped short of endorsing any change to Fed monetary policy. Last month, Fed officials reiterated a pledge to keep rates very low for an “extended period,” citing employers’ reluctance to add jobs and depressed home building.

The pillars of Americans’ financial security — jobs and home values — will stay shaky well into 2011.

The findings of the new Economy Survey, released Monday, point to an economic recovery that will move slowly and fitfully this year and next. As a result, the Federal Reserve will be forced to keep interest rates near zero until at least the final quarter of this year, three-fourths of the economists said.

The new survey, which will be conducted quarterly, compiles forecasts of leading private, corporate and academic economists on a range of indicators, including employment, home prices and inflation. Among the first survey’s key findings:

Sales of new homes in the U.S. unexpectedly fell in February to a record low as blizzards, unemployment and foreclosures depressed the market.

Purchases decreased 2.2 percent to an annual pace of 308,000, figures from the Commerce Department showed today in Washington. The median sales price climbed by the most in more than two years.

New-home sales are vying with foreclosure-induced declines in prices for existing homes in an economy where unemployment is forecast to average 9.6 percent this year, close to a 26-year high. Treasury Secretary Timothy F. Geithner yesterday said it would take a “long time” to repair the market as the administration takes steps to overhaul real-estate financing and regulation.