U.S. Stocks Open Higher After Housing Data

NEW YORK (MarketWatch) -- U.S. stocks opened higher on Wednesday, with the Dow Jones Industrial Average boosted by speculation about Citigroup Inc., while the broad market digests mixed housing data and a cautious outlook at chip-equipment maker Applied Materials.

The Dow industrials were up 45 points at 13,434, lifted by shares of Boeing Co. , Johnson & Johnson , United Technologies and JP Morgan Chase & Co. .

Leading gains among blue chips, Citigroup rose 3% after hedge-fund manager Edward Lampert -- better-known as the chairman of Sears Holdings -- disclosed he bought more than 15 million shares in the bank.

"This acquisition may raise the theoretical issue of whether Citigroup should be broken up or not to a new level," said Richard Bove, banking analyst at Punk Ziegel & Co.

Hewlett-Packard dropped 0.4% ahead of posting quarterly results after the close.

The S&P 500 index rose 6.9 points to 1,508, while the Nasdaq Composite gained 11 points to 2,536.

Technology shares overcame pressure among chip-equipment makers. Applied Materials fell 4.6% after forecasting flat sales in its fiscal third quarter and up to a 15% drop in orders.

Rival chip equipment makers KLA-Tencor , Lam Research and Novellus Systems also came under selling pressure.

Elsewhere among tech shares, Agile Software jumped 12% after agreeing to be bought by Oracle Systems for $495 million, or $8.10 a share, a 14% premium to Tuesday's close.

Housing

The market showed little reaction to news that U.S. home builders pulled back on filing for permits to build homes in April, but started construction on more houses than they did in March.

Building permits fell 8.9% to 1.429 million in April, the lowest since June 1997, and the largest percentage decline in 17 years. The number was much lower than the 1.51 million pace expected by economists surveyed by MarketWatch.

Meanwhile, the number of new houses started increased by 2.5% to 1.528 million, higher than the 1.48 million pace expected.

"On a trend basis starts and permits tell the same story," said Ian Shepherdson, chief U.S. economist at High Frequency Economics. "But looking at the data over short periods, permits matter much more than starts because they are less affected by the weather."

"The drop in April permits is therefore alarming," Shepherdson said, although he noted that an early Easter may have impacted the data.

Yet, the stocks of homebuilders rose, with investors shrugging off the data as they did upon Tuesday's news that confidence among homebuilders fell to a 16-year low. Shares of Toll Brothers Inc. , Hovnanian Enterprises Inc. and KB Home all advanced.

The Fed

The stock market has shown little concern about a slowing economy recently.

Stocks finished mixed on Tuesday after news of weaker-than-expected consumer prices in April eased concerns about inflation, boosting hopes that the Federal Reserve will be able to cut interest rates to boost a slowing economy.

But there was further confirmation of a weak trend in consumption after reports from Home Depot and Wal-Mart Stores .

Earnings

A few more earnings reports were still trickling through Wednesday.

Sony rose 3.4% after the Japanese electronics giant said this year's earnings will rise on a recovery on its consumer electronics business. Its fourth-quarter loss widened.

Deere & Co. gained 1.6%. It said profit dropped 16%, though it beat analyst earnings expectations. Jack In The Box reported a better-than-forecast 25% profit rise.

Other Markets

Crude oil futures dropped 73 cents to $62.44 a barrel before weekly energy data.

Gold futures declined $6.40 to $668.40 an ounce.

The dollar rose against the yen as the Bank of Japan began a two-day policy meeting.

Treasury bonds advanced.

By Nick Godt