NEW YORK -- An encouraging home sales report helped lift stocks Friday, but the gains were limited by investors' concerns about the market's long-term prospects.
Analysts said investors were still searching for a clear direction after strong gains in the previous two weeks. Many were optimistic stocks could continue upward, while others worried that Wall Street's recent advance was a bear-market rally that would quickly lose steam.
"The big picture economic and earnings data has been so-so, but the market is holding its own," said Bryan Piskorowski, market commentator at Prudential Securities. "The data suggests we shouldn't be going up, up and away, so we're getting a sloppy, sideways kind of action."
By midafternoon, the Dow Jones industrial average was up 40.57, or 0.5 percent, at 8,357.91, after dropping 176.93 points Thursday on investor concerns that a recent two-week rally was too much, too soon.
The broader market was also higher. The Nasdaq composite index rose 16.06, or 1.2 percent, to 1,314.77. The Standard & Poor's 500 index gained 5.16, or 0.6 percent, to 887.66.
The market lurched up and down as investors grew heartened by strong housing data, but discouraged by weak durable goods orders and consumer sentiment.
The Commerce Department reported Friday that new home sales rose 0.4 percent in September to a seasonally adjusted annual rate of 1.021 million, the highest rate on record. Economists predict 2002 will be the best year ever in terms of sales of both new and existing homes.
But another Commerce Department report showed a sharp 5.9 percent decline last month in orders to U.S. factories for durable goods. The drop, the biggest in 10 months, was much larger than the 2 percent decline analysts were expecting.
And the University of Michigan reported that consumer sentiment for October decreased to 80.6 from 86.1 in September, the lowest level since 1993, according to Dow Jones Newswires. Economists were expecting a reading of 81.3.
Analysts say investors have become more hopeful after the two-week rally on better-than-expected earnings have boosted stocks. Since hitting a five-year low on Oct. 9, the Dow has gained more than 1,000 points.
But stocks remain vulnerable to bouts of profit-taking as investors worry about the market's long-term recovery. Lingering uncertainties including a possible war with Iraq and the strength of the market also continue to pressure the market, analysts said.
Gainers included Starbucks, which jumped 96 cents to $23.41, after the coffee retailer slightly raised its guidance for the fourth quarter and the full year.
Household International rose 81 cents to $23.64 after the consumer finance company said it raised $900 million in two securities offerings.
Pharmaceutical companies got a boost after Lehman Brothers upgraded their stocks. Wyeth gained $1.32 to $34.58, and Schering Plough jumped $1.11 to $20.23.
Cigna tumbled $23.80, or 37.4 percent, to $39.80, after the insurance and financial services company warned that third-quarter and full-year earnings would be lower than expected, citing higher costs.
Amazon dropped $1.26 to $18.60 after the Internet retailer reported a narrower third-quarter loss.
Advancing issues outnumbered decliners 15 to 11 on the New York Stock Exchange. Volume came to 830.56 million shares, compared with 1.11 billion traded at the same point Thursday.
The Russell 2000 index, which tracks smaller company stocks, rose 1.76, or 0.5 percent, to 367.78.
Overseas, Japan's Nikkei stock average finished 1.3 percent higher. In Europe, Germany's DAX index was down 0.2 percent, France's CAC-40 fell 0.6 percent, and Britain's FTSE 100 declined 1.3 percent.
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