Indexes rally on strong data as turbulence eases

NEW YORK (Reuters) - U.S. stocks jumped on Friday as surprisingly strong data on home sales and durable goods orders relieved anxiety about the economy and bolstered investor confidence after weeks of market turbulence.

The gains helped the S&P 500 index post its best week in five months, even with more news pointing to further turmoil in the subprime mortgage sector.

Both the Dow industrials and the S&P got a big boost from energy stocks such as Exxon Mobil Corp(NYSE: - ), which benefited from a 2 percent surge in oil prices.

Sales of new U.S. homes in July rose 2.8 percent, reversing two months of declines and a report showed new orders for durable goods, which are long-lasting U.S.-made products, soared in the same period.

Technology shares, among stocks that get hit when economic worries rise, ranked among Friday's top gainers, with Apple Inc. (NasdaqGS: - ) the Nasdaq's No. 1 advancer.

"The stronger-than-expected new home sales are definitely a good data point, particularly given the gloom and doom people are hearing about the housing sector," said Todd Clark, managing director of stock trading at Nollenberger Capital Partners, in San Francisco.

The Dow Jones industrial average (DJI: - ) shot up 142.99 points, or 1.08 percent, to end at 13,378.87. The Standard & Poor's 500 Index ( - ) climbed 16.87 points, or 1.15 percent, to finish at 1,479.37. The Nasdaq Composite Index (Nasdaq: - ) rose 34.99 points, or 1.38 percent, to close at 2,576.69.

A WEEK TO REMEMBER

For the week, the S&P 500 was up 2.3 percent, its best weekly percentage gain since March 25. The Nasdaq was up 2.9 percent -- also its best week since March 25 -- and the Dow was up 2.3 percent -- its best week since April 22.

The stock indexes' gains accelerated late in the day, and all 10 S&P sectors ended the session higher, led by energy. Exxon rose 2.3 percent to $85.69. U.S. crude futures (CLc1) rose $1.26 to settle at $71.09 per barrel. For more see (O/N).

"We had an extremely light day of volume, and for people who wanted to get stocks bought -- meaning people concerned about covering shorts -- there was more of a mandate to get that done," said Michael James, senior trader at regional investment bank Wedbush Morgan, in Los Angeles.

Just 1.19 billion shares changed hands on the New York Stock Exchange, well below last year's estimated daily average of 1.84 billion. On Nasdaq, about 1.66 billion shares traded, also sharply below last year's daily average of 2.02 billion. Advancing stocks outnumbered declining ones by a ratio of more than 3 to 1 on the NYSE and by 2 to 1 on the Nasdaq.

Apple shares, which on Thursday topped the Nasdaq's decliners, rose 3.2 percent to close at $135.30.

Shares of big manufacturers, which tend to do well in a stronger economy, advanced. Boeing Co. (NYSE: - ) shot up 1.8 percent to $98.47 on the NYSE.

A Commerce Department report showed sales of new U.S. homes unexpectedly rose to an annual pace of 870,000 in July, reversing two months of declines, and inventories eased. The Dow Jones U.S. home builder index (DJI: - ) rose 0.4 percent to end at 434.91.

Another report showed the biggest gain in U.S. durable goods orders since September. Durable goods include washing machines, refrigerators and other big-ticket products meant to last three years or more.

Late in the day, the Fed clarified that the system will consider accepting investment-grade asset-backed commercial paper as collateral at its discount window.

On Thursday, stocks fell after the CEO of Countrywide Financial Corp (NYSE: - ), the biggest U.S. mortgage company, said the persistent downturn in the U.S. housing market could lead to a recession.

Overnight, four of Asia's biggest banks, including the commercial, but state-run Bank of China (HKSE: - ), revealed bigger-than-expected exposure to U.S. subprime loans, which are mortgages extended to borrowers with shaky credit.