Stocks bounded higher Wednesday, with the Dow up about 1 percent, as investors cheered the better-than-expected jump in durable-goods orders and shrugged off a weak new-home-sales report.
Techs got the biggest boost, with the Nasdaq up more than 2 percent, after strong earnings from Oracle after the bell Tuesday.
New-home sales fell 0.6 percent to a 342,000 annual rate in May. Economists polled by Reuters had expected the pace to increase to 360,000 from April's 352,000.
Orders for durable goods, big-ticket items like refrigerators and cars, rose 1.8 percentlast month, triple the 0.6-percent gain expected, amid strong aircraft sales. Excluding volatile transportation components, orders were up 1.1 percent.
A plunge in durable goods orders in December/January "overstated underlying weakness as panic temporarily set in," Joshua Shapiro, chief U.S. economist at MFR, wrote in a note to clients. "Now, with it appearing as if the world is not ending, some of the activity that should have occurred in those months has trickled into the data. However, the overall picture is still soft."
Mortgage applications rebounded last weekfrom a seven-month low, the Mortgage Bankers Association reported, as mortgage rates began to recede.
Some economists say we've probably hit a bottom in the housing market, but it's not going to be a straight up recovery from here. Banks are showing a reluctance to close deals on homes in or near foreclosure and real-estate pros say inventory is going to have to go down another 40 percent before home sales start rising.
Oil was back above $69 a barrel after data showed crude stockpiles were depleted by 3.7 million barrels last week, nearly three times the decline expected. Gasoline stockpiles, however, surged.
The Federal Open Market Committee releases its statement at 2:15 pm New York time, at the end of two days of meetings. Economists expect the Fed to give a nod to stabilization of the economy. It may also add some weight to its comments about holding rates downand it may tweak its quantitative-easing program.
The dollar hit its lowest level in nearly two weeks against a basket of currencies ahead of the Fed meeting.
A lower dollar boosted mining stocks and in Asia and Europe as metals prices increased. Gold climbed past $930 a troy ounce.
The other big event of the day is a $35 billion Treasury auction of five-year notes. This comes after a $40-billion offering of two-year notes was well received Tuesday.
Oracle shot up more than 7 percent after the software giant beat earnings expectations as profit margins hit a record and software sales declined less than expected.
>> Software Sector in Recovery Mode
But Boeing shares dragged on the Dow for a second day following news of yet another delay for its 787 Dreamliner. Morgan Stanley cut its rating on the stock to "equal weight" from "overweight."
JPMorgan Chase ticked higher following news that the company was the world's strongest bank in 2008, The Banker magazine reported in its annual list of 1,000 strongest banks globally. The UK's Royal Bank of Scotland was the biggest loser of 2008.
Overall, bank stocks were higher, with Bank of America up more than 3 percent and the SPDR financial exchange-traded fund up more than 2 percent.
Citigroup rose following news that the bank is going to raise base salaries by as much as 50 percent to offset smaller annual bonuses.
Meanwhile, a major union this week called on Morgan Stanley to reverse recent salary hikes for senior executives and other top earners, the Wall Street Journal reported.
Bank of New York Mellon advanced amid news that the bank is one of three remaining contenders to buy Citi's Japanese asset management unit.
General Motors skidded following news that the automaker plansto cut up to 4,000 more white-collar jobs by year end.
Still to Come:
WEDNESDAY: Weekly oil inventories; Fed announcement
THURSDAY: Weekly jobless claims; GDP (final); Earnings from Palm
FRIDAY: Personal income/spending; consumer sentiment; Earnings from KBHome
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