Strong data, financials drive stocks higher

NEW YORK (Reuters) - Stocks rose on Wednesday as surprisingly strong data on durable goods orders soothed some concern about the sluggish economy while Fannie Mae and Freddie Mac led a rally in financial shares.

Energy shares gained with higher oil prices, which rose for the third straight day on fears that Tropical Storm Gustav could interrupt oil and natural gas output in the Gulf of Mexico.

Investors, meanwhile, were cheered by data showing new orders for big-ticket manufactured items jumped a surprisingly strong 1.3 percent in July. Boeing (BA.N: Quote, Profile, Research, Stock Buzz) shares added nearly 2 percent after the data showed a 28 percent rise in orders for civilian aircraft.

"Durable goods orders were up very nicely, and the market is going up because that has helped people start to look beyond the valley of all the economic and credit concerns to better times ahead," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis. "People are a little less pessimistic."

Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz) rallied for a third straight day as investors grew more confident that there will not be a government bailout that would wipe out their equity.

The Dow Jones industrial average was up 89.64 points, or 0.79 percent, at 11,502.51. The Standard & Poor's 500 Index was up 10.12 points, or 0.80 percent, at 1,281.63. The Nasdaq Composite Index was up 20.49 points, or 0.87 percent, at 2,382.46.

Trading volume, which has been light for much of August, was especially thin ahead of the U.S. Labor Day holiday weekend. Thin trade can exaggerate price moves.

Fannie Mae, the biggest provider of U.S. home financing, rose 15.3 percent to $6.48, while shares of Freddie Mac gained 19.7 percent to $4.75. Continued...

reuters.com, 27 August 2008, 03:35