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Stocks Jump as Oil Slides on Crude Build

Stocks jumped as oil prices dropped nearly $5 on news of an unexpected build in crude inventories.

Also giving a boost to the market wereeconomic reports that showed a smaller-than-expected drop in new-home sales and a stabilization in durable-goods orders.

Light, sweet crude fell below $133 a barrel after the EIA reported an 800,000-barrel build in crude inventories; economists had expected a 1.4-million-barrel draw.

New-home sales fell 2.5 percent in May to an annual rate of 512,000 units,after a 4.8 percent advance in April. It was the fifth decline in the past six months but better than the 510,000 pace economists had expected. In annual terms, home sales are down more than 40 percent.Inventories rose to a 10.9-month supply.

Earlier, a report showed mortgage applications fell for a second straight week, hitting their lowest level since December 2001 even as interest rates fell.

Orders for durable goods, which are items that are meant to last three years or more such as appliances and cars, were unchanged in May . April was revised to show a 1-percent drop, more severe than the 0.6-percent slide previously reported. Demand for nondefense capital goods excluding aircraft, which is a closely watched gauge of business spending, fell by 0.8 percent last month.

The market isn't expected to make too many fast moves today as traders watch and wait for the Federal Reserve's decision on interest rates, due out at 2:15 p.m. ET.

The Fed has its hands tied by weakness in the U.S. market and it cannot raise the rates to keep a lid on inflation, and monetary policy would not be of use in face of commodity-price rises, some analysts said.

(What can we expect from the Fed today? Click on the video at left.)

Keeping rates steady is about the only strategy the central bank has to control inflation generated primarily by skyrocketing oil prices, while also tending to an economy teetering on the brink of recession, Doug Elmendorf, a senior fellow at the Brookings Institution, said.

Financials continued a rally started in the prior session, with a lot of the big brokerages up 1-2 percent and the regional banks up more than that.

Lehman Brothersadvanced after the companysaid it was rehiring two executives who had left in 2007 for unspecified reasons.

Lehman said it was hiring Michael Gelband, who resigned last year as global head of fixed income, to the newly created post of global head of capital markets. It also rehired Alex Kirk, co-chief operating officer for the fixed income division, until 2007.

"Right now what you have is a trading rotational market here -- you find something that goes down, buy the dip," Gordon Charlop of Rosenblatt Securities told CNBC, citing financials and Monsanto as examples. But, that doesn't mean the market is going to follow suit, Charlop added.

"This is a good market for a trader, but I don't think it's taking off anytime soon," Charlop said.