Stocks rise following gain in durable goods orders

The Commerce Department said orders for durable goods jumped 1.3 percent in July compared with the previous month, led by a big gain in demand for commercial aircraft. That was well above the 0.1 increase expected by economists surveyed by Thomson/IFR.

Durable goods, which also include cars, appliances and machinery, are under scrutiny not only because they reflect business spending, but because they are also an indicator of consumer confidence. The July increase equaled a 1.3 percent rise in June; both months produced the strongest gains since a 4.1 percent leap back in December.

Light, sweet crude rose $1.88 to settle at $118.15 per barrel on the New York Mercantile Exchange on worries that Tropical Storm Gustav could enter the Gulf of Mexico as a hurricane and disrupt oil and natural gas production.

"The strength in durable goods is just the latest indication that manufacturing is actually holding in quite well and that's a really big plus," said Stuart Schweitzer, global markets strategist at J.P. Morgan's Private Bank. "Against the backdrop of the drumbeat of negative news of the last several weeks it was encouraging to see a little bit of positive news. The basic fact of the matter is that although the economy has been weak, it hasn't fallen off a cliff."

The Dow Jones industrial average rose 89.64, or 0.79 percent, to 11,502.51 after rising more than 140 points.

Broader stock indicators also rose. The Standard & Poor's 500 index gained 10.15, or 0.80 percent, to 1,281.66, and the Nasdaq composite index rose 20.49, or 0.87 percent, to 2,382.46.

As it had been earlier in the week, trading was again light because many investors are fitting in vacations ahead of Labor Day. Low volumes tend to skew the market's moves.

Bond prices rose. The yield on the benchmark 10-year Treasury note, which moves opposite its price, fell to 3.77 percent from 3.78 percent late Tuesday. The dollar was mixed against other major currencies, while gold prices rose.

Schweitzer noted the relative strength of the manufacturing sector, fed in part by a weak dollar that makes U.S. goods less expensive abroad, is helping undergird the overall economy.