U.S. Stock Gains Trimmed As Fannie, Freddie Hit

NEW YORK (MarketWatch) -- U.S. stocks on Friday pared gains after Standard & Poor's Ratings Services put Fannie Mae and Freddie Mac on CreditWatch Negative, dimming investors' cheer over crude's decline and a surprising rise in orders for durable goods.

"S&P downgrading Fannie and Freddie is seeping in, and the financial system is going under the waves. People might have looked up at the calendar and saw it was Friday, too," said Art Hogan, chief market strategist at Jefferies & Co.

After briefly falling into negative turf, the Dow Jones Industrial Average rose 6 points to 11,355, with 18 of its 30 components trading higher.

General Motors Corp. proved the greatest weight on the blue-chip index, with shares of the auto maker lapsing nearly 4%.

The S&P 500 gained 5 points to 1,259, leaving it poised to end flat with where it stood at the close one week ago.

Energy led sector gains after a bruising week.

The technology-laden Nasdaq Composite climbed 20 points to 2300.

The data on orders, shipments and inventories of big-ticket goods "revealed surprising strength in ex-transportation orders with a 2% June gain that caught the market's eye," said analysts at Action Economics.

New orders for durable goods climbed 0.8% last month, the Commerce Department reported, better than the drop of 0.3% many economists predicted. .

Consumer discretionary shares also edged up, with home builders, including Pulte Homes Inc. , among the larger gainers.

Financials and telecommunication services led sector declines among the S&P's 10 industry groups.

Shares of Juniper Networks Inc. rallied nearly 14% after the maker of networking gear said third-quarter sales would come in as much as 5% higher than analyst estimates.

Among financials, shares of Washington Mutual Inc. slipped further on concern unsecured creditors are losing faith in the nation's biggest thrift. After losing more than 30% of their value Wednesday and Thursday, the shares were off 0.3%. .

Volume on the New York Stock Exchange hit 804 million, with advancing stocks ahead of those declining 8 to 6. On the Nasdaq, 557 million shares traded, and advancers outpaced declining issues 8 to 5.

Home base

Also on the economic-data front, U.S. foreclosures in the second quarter more than doubled from the year-earlier quarter and rose nearly 14% from the previous quarter, according to RealtyTrac.

And consumer sentiment picked up in July, albeit at a relatively low level, according to a media report. .

On the New York Mercantile Exchange, oil futures traded $1.84 lower to $123.65 a barrel. .

"Crude has stabilized and the possibility of some corrective upside action from its low at $123-a-barrel support may also be responsible for some concerns in the equity space," said Tom di Galoma, head of Treasurys trading at Jefferies & Co.

Standouts

Shares of Crocs Inc. plunged 42% after the footwear maker slashed its outlook late Thursday on soft demand for its brightly colored sandals. .

"They saturated the market and will suffer the fate of all single-product publicly traded companies and go under the waves," Hogan said of Crocs.

Delta Air Lines Inc. advanced almost 8% as the airline was reportedly upgraded by Merrill Lynch to buy.

And Wachovia Corp. fell 8%. Late Thursday, the bank said that its chief financial officer, Thomas Wurtz, was stepping down.

Also in the spotlight, Honda Motor Co. reported stronger-than-forecast 8% profit growth for the first quarter by reducing sales incentives in North America and trimming costs.

In London, the FTSE 100 fell nearly 1% as insurers lost ground. .

Results from Samsung Electronics and National Australia Bank weighed in Asia, with Tokyo's Nikkei 225 benchmark retreating 2%.

By Kate Gibson