New York – U.S. stocks closed up slightly Friday as investors rested on strong weekly gains that came on hopes that the Federal Reserve has moved closer to cutting interest rates should the economy weaken too much.
News that existing-home sales unexpectedly rose in February also helped soothe immediate concerns about the housing market Friday.
“The housing number was better than expected, and that takes away from the belief that this economy is going to do as badly as the market has feared,” said Owen Fitzpatrick, head of the U.S. equity group at Deutsche Bank. “But it’s hard to put too much into one number. Our opinion is that the housing market hasn’t bottomed out.”
The Dow Jones industrial average gained 19.87 points to close at 12,481.01 and rose 3.1 percent for the week.
General Motors Corp. jumped 5.5 percent as market rumors swirled about potential bidders for DaimlerChrysler unit Chrysler, reducing the likelihood that GM might bid for its rival.
Investors also monitored news from the U.K. Ministry of Defence, which said Iranian forces were holding 15 members of the British Navy.
Crude-oil prices gained 59 cents to close at $62.28 on the news. Oil rose 4.5 percent for the week.
“Energy prices creeping out of that previous comfort zone are also a bit of a concern,” Fitzpatrick said. “People got complacent about (oil) staying between $50 and $60 (a barrel).”
Dow component Citigroup Inc. was also in focus. According to The Wall Street Journal, a faction within the bank is calling for it to make a bid for ABN Amro, the Dutch bank holding merger talks with Barclays Plc.
The S&P 500 rose 1.57 points to 1,436.11. The broad index gained 3.6 percent for the week, its best weekly gain in four years. The Nasdaq composite lost 2.81 points to 2,448.93.
Stocks reversed early weakness following news that sales of existing homes unexpectedly rose 3.9 percent in February to a seasonally adjusted annual rate of 6.69 million. Wall Street economists expected a decline to about 6.35 million.
“Sales cannot be sustained at this level, which is way above the pace implied by mortgage applications, so the day of reckoning has merely been delayed,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.
“The sudden onset of more normal winter weather in late January will depress sales in due course, even before considering the potential impact of the subprime blowup,” he said.
Even with the gain in sales, the inventory of unsold homes rose 5.9 percent last month, while the average selling price fell 1.3 percent.
Homebuilding stocks fell, giving back early gains scored right after the data. The Philadelphia housing-sector index was weighed down by the likes of Champion Enterprises, Centex, KB Home and Lennar Corp.
