Stocks Rally on Housing Data

U.S. stocks closed higher for a fourth straight session Friday, reaching their highest levels of the year. Wall Street's rally continued as investors embraced a 7.2% spike in July existing home sales and encouraging comments about the economy from Federal Reserve Chairman Ben Bernanke.. In a speech at the Kansas City Fed's annual conference in Jackson Hole, Wyo., Bernanke acknowledged the global economy is more stable, and said "the prospects for a return to growth in the near term appear good."

Friday's market gains also came as August options expired, notes S&P MarketScope. An extended rebound for the Shanghai composite index also boosted stock-market sentiment.

On Friday, the 30-stock Dow Jones industrial average finished higher by 155.91 points, or 1.67%, at 9,505.96. The broad Standard & Poor's 500-stock index was up 18.76 points, or 1.86%, to 1,026.13. The tech-heavy Nasdaq composite index added 31.68 points, or 1.59%, to 2,020.90.

Treasuries were off sharply on the existing home sales news.

The dollar index was off, and the euro up after a rise in a key measure of Eurozone manufacturing sentiment. The yen was off on a report China intended to raise bank capital requirements.

Gold and crude oil futures were higher.

After Friday's upside surprise in existing home sales, the onus is now on upcoming data to suggest the recovery is sustainable, says Action Economics. "There isn't a lot on next week's calendar, however, to provide the tangible evidence needed," says Action Economics. The focus will be on Wednesday's releases of new home sales and durable goods orders for July. Median estimates point to a 3% rebound in durable orders, and a modest rise in new home sales to a 0.390 million unit annual pace.

Next Friday's July reports on personal income and personal consumption expenditure data will also be important, according to Action Economics, with small gains expected for each.

Dow Jones has been talking to potential buyers about the sale of its stock-market indexing business, which includes the Dow Jones industrial average, The Wall Street Journal reported on Friday.

The Journal, in its online edition, reported that the process is being run by Goldman Sachs, and could result in a sale, joint venture or some other type of arrangement. The report cited people familiar with the matter.

In company news Friday, KKR-owned discount retailer Dollar General has filed to raise up to $750 million in an initial public offering.

Shares of customer management software company (CRM) surged Friday after the company posted better than expected second-quarter earnings.

Shares of food giant J.M. Smucker (SJM) rallied after beating expectations. Reuters and other news services reported Friday that the U.S. government said it will suspend its popular "Cash for Clunkers" auto rebates on Monday as the program's $3 billion budget runs dry, a month after it was launched. The program, offering payments of up to $4,500 to people who trade in old gas guzzlers for new, fuel-efficient vehicles, will end at 8 p.m., Aug. 24, by which time all applications for the rebates must be submitted to Washington. It has provided a big temporary boost for both the deeply troubled auto industry and the battered U.S. economy. In the past few weeks both Ford Motor (F) and General Motors have increased production, as some models have been in short supply. However, the temporary nature of the program is likely to raise concerns that it may have only brought sales forward from future months, and sales could plunge again.

In economic news Friday, U.S. existing home sales rose 7.2% to a 5.24 million unit annual rate in July, much better than expected, from an unrevised 4.89 million in June. That's the largest monthly gain in 10 years, the highest pace since August 2007, a fourth consecutive monthly gain and leaves the sales pace well above the 4.91 million pace from last August. Single family sales rose 6.5%, and condo/coop sales were up 12.5%. The months supply was steady at 9.4. The median sales price fell to $178,400 from a revised $182,000 (was $181,800), but is down 15.1% year-over-year.

August Eurozone manufacturing PMI rose to 47.9 from 46.3 in July, which was stronger than the median forecast of economists surveyed by Bloomberg of 47.5. The services PMI jumped to 49.5 from 45.7 and the composite PMI rose to 50.0.

British car production fell 17.9% on the year in July, its smallest annual decline in 10 months, helped by government car scrappage schemes, the Society of Motor Manufacturers and Traders said.

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