Market rises as data eases economic fears

NEW YORK (Reuters) - Stocks rose on Friday as a drop in oil prices, and stronger-than-expected data on consumer sentiment and housing blunted the latest concerns about the health of U.S banks.

The Nasdaq rose more than 1 percent, helped not only by lower oil prices, but also after Juniper Networks JNPR.O raised its full-year outlook on strong demand for network equipment. The results, which sent Juniper shares up 17.7 percent, showed strength among companies linked to the Internet.

Another drop in oil prices, adding to a sharp sell-off over the last two weeks on signs of weakening demand, was particularly welcomed by investors in airlines and industrials.

But financial stocks weighed on the Dow and S&P. Wachovia Corp WB.N shares fell 7.6 percent, leading bank stocks lower a day after the fourth-largest U.S. bank said its finance chief was quitting. In addition, a brokerage analyst downgraded the shares.

Home builders rose after the data on new homes gave a glimmer of hope for the beaten-down housing market.

Big manufacturers, including United Technologies (UTX.N), rose after a report that showed an unexpected jump in orders for long-lasting durable goods.

"We have oil down, the better-than-expected economic indicators and yet we are not up very much," said Al Kugel, chief investment strategist at Atlantic Trust in Chicago.

"One thing that is the dampening effect is that the financials are still not doing very well. Everybody is asking how much more bad news is there out there."

.The Dow Jones industrial average .DJI rose 21.41 points, or 0.19 percent, to 11,370.69. The Standard & Poor's 500 Index .SPX added 5.22 points, or 0.42 percent, to 1,257.76, while the Nasdaq Composite Index .IXIC jumped 30.42 points, or 1.33 percent, to 2,310.53.

For the week, the Dow fell 1.1 percent and the S&P 500

dipped 0.2 percent, while the Nasdaq rose 1.2 percent.

U.S. oil futures slid $2.23 to settle at $123.26 a barrel.

Consumer sentiment rebounded unexpectedly this month after falling to levels last seen in the early 1980s, as tax rebate checks helped offset high gas prices, while new home sales in July were not as weak as expected.

Among technology shares, chip maker Qualcomm Inc (QCOM.O) helped lead gains on the Nasdaq, rising 3.9 percent to $54.45, after several brokerages raised their price targets on the stock.

Juniper's shares surged 17.7 percent to $26.57 on Nasdaq. Its results helped show that companies were still investing in network equipment, particularly those items vital to handling increased Internet traffic. Shares of rival Cisco Systems (CSCO.O) gained 3.1 percent to $22.43.

Among the Dow's major advancers, United Technologies added 1.6 percent to $65.23 on the NYSE.

The Dow Jones home construction index rose 1.5 percent. Pulte Homes Inc (PHM.N) shot up 2.5 percent to $11.31, two days after reporting a smaller quarterly loss compared with a year ago.

Sounding a downbeat note, though, was apparel retailer Abercrombie & Fitch Co (ANF.N), which fell 7.5 percent to $55.86 a day after the firm's chief financial officer resigned. The S&P retail index was down 1.1 percent.

And the banking sector also weighed on the market. Wachovia's stock WB.N lost 7.6 percent, or $1.19, to $14.50. Morgan Keegan cut its rating on the bank to "underperform."

Fannie Mae (FNM.N) shares fell 3.9 percent to $11.55 and Freddie Mac (FRE.N) shares shed 6.1 percent to $8.27.

Standard & Poor's said it may cut the subordinated debt and preferred stock ratings.

Other financial shares also struggled as investors continued to book profits after the sector's recent rally.

Bank of America (BAC.N), the No. 2 U.S. bank, fell 3.5 percent to $29.58. Citigroup (C.N) shares dropped 1.1 percent to $18.85. both dragged on the Dow industrials and the S&P, limiting their gains.

Trading volume was low on the New York Stock Exchange, with about 1.29 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 2.02 billion shares traded, also below last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on the NYSE by about 9 to 7 on the NYSE and by 17 to 11 on the Nasdaq.

(Editing by Jan Paschal)