Aug. 24 (Bloomberg) -- U.S. stocks rose as better-than- forecast home sales and durable goods orders helped the Standard & Poor's 500 Index complete its best weekly gain since March.

Nucor Corp. led a rally in raw-material producers after Merrill Lynch & Co. advised investors to buy the second-largest U.S. steel company. Exxon Mobil Corp., the biggest oil producer, climbed after crude prices jumped the most this month.

The S&P 500 increased 16.87, or 1.2 percent, to 1,479.37. The Dow Jones Industrial Average added 142.99, or 1.1 percent, to 13,378.87. The Nasdaq Composite Index gained 34.99, or 1.4 percent, to 2,576.69.

Government reports today showed American businesses increased spending in July and the housing market showed signs of stability, adding to evidence the economy will keep growing. The S&P 500's 2.3 percent weekly advance was bolstered by the Federal Reserve's surprise decision Aug. 17 to lower the discount rate.

``We don't see a recession in the cards,'' said Hayes Miller, who helps manage $38 billion as portfolio manager of global equities at Baring Asset Management Inc. in Boston. ``There's still going to be enough corporate spending, there's still going to be enough investment, there's still going to be enough government spending.''

European Advance

European stocks posted their biggest weekly advance since June. Asian stocks fell for the first time in five days after Bank of China Ltd. said it had almost $9.7 billion invested in U.S. subprime loans.

Nucor added $3.58, or 7 percent, to $55.11. ``We believe we are reaching a bottom for flat rolled steel and look for a rebound sometime in the fall as we believe inventories will drop lower and imports remain relatively tame,'' Merrill Lynch analyst David A. Lipschitz wrote in a note to investors.

Energy companies gained 2.1 percent as a group, the most among 10 industries in the S&P 500, as crude oil rose above $71 a barrel on signs of accelerating economic growth. Exxon added $1.94 to $85.69. Chevron Corp., the second-largest U.S. oil company, climbed $1.74 to $87.22.

Gap Inc. increased $1.11, or 6.4 percent, to $18.51. The retailer said profit rose for the first time in eight quarters after it eliminated jobs and reduced inventory. Gap also increased its full-year profit forecast and said it plans to buy back an additional $1.5 billion of its own shares.

Durable goods orders advanced 5.9 percent last month, the Commerce Department said. Economists in a Bloomberg survey had expected a gain of 1 percent. Excluding orders for transportation equipment such as airplanes, durable-goods orders rose 3.7 percent, topping economists' forecast of 0.6 percent.

In a separate report, the Commerce Department said purchases of new homes increased 2.8 percent to an annual pace of 870,000, exceeding the highest estimate in a Bloomberg survey of economists.

`A Real Shocker'

``Everybody was looking for a disaster with these numbers,'' said Jack Bouroudjian, chief investment strategist at Chicago- based Brewer Investment Group, which oversees about $300 million. ``Durable goods was a surprise this morning, and now new homes sales is a real shocker.''

Homebuilders gained after the Commerce Department's report. Toll Brothers Inc., the largest U.S. luxury home builder, added 44 cents to $23.09. Hovnanian Enterprises Inc., New Jersey's largest homebuilder, added 13 cents to $11.98.

A gauge of stock-market volatility had its biggest weekly drop since its creation in 1990. The Chicago Board Options Exchange Volatility Index, or VIX, declined 31 percent over the past five days to 20.72. The VIX, derived from prices paid for options on the S&P 500, shows traders expect smaller stock-market swings in the next 30 days.

In other markets, yields on the benchmark 10-year Treasury note fell 0.03 percentage point to 4.62.

More than four stocks gained for every one that fell on the New York Stock Exchange. Some 1.19 billion shares changed hands on the Big Board, 32 percent less than the three-month daily average and the least amount since July 3.

AnnTaylor, Whole Foods

AnnTaylor Stores Corp. added $2.79, or 9.4 percent, to $32.43. The company, whose two clothing chains sell styles geared toward women age 25 to 55, reported second-quarter profit of 50 cents a share, beating the average analyst estimate by 2 cents.

Second-quarter earnings from companies in the S&P 500 gained 10.7 percent through Aug. 22, more than double the estimate of analysts surveyed by Bloomberg when the reporting season began.

Whole Foods Market Inc. gained $1.20 to $44.54. The largest U.S. natural-foods grocer may proceed with its $565 million takeover of rival Wild Oats Markets Inc. after an appeals court rejected U.S. regulators' attempt to block the transaction.

Countrywide

Countrywide Financial Corp., the nation's largest mortgage lender, fell $1.02 to $21, the steepest decline in the S&P 500. The sale of $2 billion of preferred stock to Bank of America Corp., while erasing concern Countrywide will go bankrupt, ``comes at a steep cost to common shareholders,'' Credit Suisse analysts wrote in a note to clients.

An index of financial shares rose 0.5 percent for the smallest gain among 10 groups in the S&P 500. MGIC Investment Corp., the largest U.S. mortgage insurer, fell 31 cents to $36.51. ProLogis, the biggest publicly traded industrial developer, led declines among real estate companies, falling $1.27 to $57.71.

Stocks fell for the first time in six days yesterday after Countrywide Chief Executive Angelo Mozilo told CNBC that the housing slump may send the nation into a recession.

Marvell Technology fell $2.10 to $15.75 after the maker of chips used in Apple Inc.'s iPod music player said it earned 6 cents a share, excluding some items, in the second quarter. That was 1 cent short of the average estimate from analysts in a Bloomberg survey.

The Russell 2000 Index, a benchmark for companies with a median market value of $647 million, gained 1.4 percent to 798.93. The Dow Jones Wilshire 5000 Index, the broadest measure of U.S. shares, rose 1.2 percent to 14,896.21. Based on its advance, the value of stocks increased by $219.3 billion.

AnnTaylor Stores Corp. (ANN US)
Chevron Corp. (CVX US)
Countrywide Financial Corp. (CFC US)
Exxon Mobil Corp. (XOM US)
Gap Inc. (GPS US)
Hovnanian Enterprises Inc. (HOV US)
Marvell Technology Group Ltd. (MRVL US)
MGIC Investment Corp. (MTG US)
Nucor Corp. (NUE US)
ProLogis (PLD US)
Toll Brothers Inc. (TOL US)
Whole Foods Market Inc. (WFMI US)

To contact the reporter on this story: Eric Martin in New York at emartin21@bloomberg.net.

Last Updated: August 24, 2007 18:15 EDT