New York – Stocks ended sharply higher Friday, with the major indexes scoring weekly gains of more than 2 percent, after an unexpected rise in new-home sales jump-started thinking that the worst of the subprime mess could be over and a recession avoided.
“The market is focused on the combination of economic numbers today, including durable goods and a surprisingly good housing number, as well as no other news coming out of the subprime area,” said Paul Nolte, director of investments at Hinsdale Associates.
Up 2.3 percent for the week, the Dow Jones industrial average rose 143 points at 13,378, with 29 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. advanced 1.9 percent. 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 16.9 points at 1,479 points, climbing 2.3 percent for the week, while the technology-laden Nasdaq Composite rose 35 points at 2,576, a weekly rise of 2.8 percent.
Shares of tech leader Apple Inc. rose 3.4 percent following reports that France Telecom was in continuing negotiations with the U.S. company over the right to market iPhone.
More than 922 million shares exchanged hands at the New York Stock Exchange, with gainers outpacing decliners by a ratio of 3-to-1. At the Nasdaq, 1.3 billion shares were traded, with gainers outpacing decliners by a 9-to-5 ratio.
Sales of new homes increased 2.8 percent 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 percent compared with July 2006.
“Our expectations are so low that we get excited about” a number such as 870,000, said Art Hogan, chief market strategist at Jefferies & Co. “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 percent 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 percent 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.
