U.S. Stocks Rise After Housing Data

NEW YORK (MarketWatch) -- U.S. stocks rose Friday, following early hesitations at the open, with a larger-than-expected increase in new home sales in July and a big jump in durable-goods orders helped soothe recent anxiety about credit woes.

"The biggest positive catalyst is the real lack of any negative news on the tape about the subprime debacle," said Art Hogan, chief market strategist at Jefferies & Co.

"The biggest cause for volatility over the last two weeks has been the daily onslaught of bad news," Hogan said. "Today, we had no new bad news and some upside surprises [on the economic front]."

The Dow Jones Industrial Average rose 27 points at 13,263, with 17 of its 30 components in positive territory, led by the likes of Boeing Co. , Wal-Mart Stores and Exxon Mobil Corp. .

Shares of Home Depot Inc. rose 1%. The company may receive $1.2 billion less than anticipated for the sale of its wholesale distribution business to private equity firms, according to a report in the Wall Street Journal.

The S&P 500 gained 3 points at 1,465 points.

The technology-laden Nasdaq Composite rose 4 points at 2,545.

More than 260 million shares exchanged hands at the New York Stock Exchange, with gainers outpacing decliners by 18 to 11. At the Nasdaq, 370 million shares were traded, with declining stocks running just ahead of gainers.

New home sales rise

Sales of new home increased 2.8% in July to a seasonally adjusted annual rate of 870,000 as the inventory of homes for sale dropped for a fourth straight month, the Commerce Department estimated Friday.

Sales were stronger than the 820,000 annualized pace expected by economists surveyed by MarketWatch. In addition, sales in June were revised slightly higher.

Sales are down 10.2% compared with last July.

"Our expectations are so low that we get excited about" a number such as 870,000, Hogan said. "It's all relative right now."

Earlier Friday, the Commerce Department reported that orders for U.S.-made durable goods surged in July, jumping 5.9% on higher demand for airplanes, vehicles, computers, machinery, steel and most other kinds of long-lasting manufactured goods.

The increase far exceeded the expected 1.5% gain forecast by economists surveyed by MarketWatch. It was the largest gain in total orders in nearly a year.

The stock market is unmoved by stronger than expected new home sales and durable goods orders, and "subprime is the key," said Todd Leone of Cowen & Co.

"I think the news has to be really, really good to move up in here," he said. "People have been very worried about the market and they're afraid of subprime. It seems like it has touched everybody."

Shares of retailer Gap Inc. rose 5%. The company's profit rose 19% in the second quarter as it chopped at costs, closed stores -- including all the Forth & Towne units -- and laid off workers amid sliding sales.

Ann Taylor Stores Corp. rallied 6% Friday. The women's apparel retailer posted a nearly 27% decline in second-quarter profit, but said it was launching a new store concept targeting the "modern boomer."

On Thursday, U.S. stocks finished broadly flat after recession warnings from executives at Countrywide Financial and Thornburg Mortgage. The Dow industrials finished a quarter-point weaker, the S&P 500 fell over a point and the Nasdaq Composite shed 11 points.

Bank of China exposed to subprime

Hong Kong-listed shares of Bank of China Ltd. shed more than 5% Friday after officials disclosed the bank had almost $10 billion of exposure to securities backed by U.S. subprime mortgages.

"We did have some news out of China today where a Chinese bank exposed subprime problems," said Peter Cardillo, chief market economist at Avalon Partners.

"Unless we get some real domestic negative news out on the mortgage market, we'll probabltrade off of the economic data today."

Other markets

U.S. Treasury prices on Friday trimmed earlier gains, pushing yields higher, after new home sales figures topped forecasts.

On the currency markets, the dollar fell against the euro and gained against the yen.

On the New York Mercantile Exchange, crude-oil prices headed higher, but were still poised to end the week with a loss as traders weighed reports of Mexico's post-hurricane resumption of oil output and an unexpected rise in U.S. crude supplies, against the largest drop in gasoline inventories so far this year.

Gold futures also gained.

By Polya Lesova