US STOCKS-Strong U.S. data, financials drive stocks higher
* Durable goods data soothes concerns about economy
* Oil rises on storm worries, boosts energy shares
* Fannie, Freddie rally as fears of government rescue ease
* Dow up 0.8 pct; S&P 500 up 0.8 pct; Nasdaq up 0.9 pct (Updates to close)
By Steven C. Johnson
NEW YORK, Aug 27 (Reuters) - U.S. stocks rose on Wednesday as surprisingly strong data on durable goods orders soothed some concern about the sluggish economy while Fannie Mae and Freddie Mac led a rally in financial shares.
Energy shares gained with higher oil prices, which rose for the third straight day on fears that Tropical Storm Gustav could interrupt oil and natural gas output in the Gulf of Mexico.
Investors, meanwhile, were cheered by data showing new orders for big-ticket manufactured items jumped a surprisingly strong 1.3 percent in July. Boeing (BA.N) shares added nearly 2 percent after the data showed a 28 percent rise in orders for civilian aircraft.
"Durable goods orders were up very nicely, and the market is going up because that has helped people start to look beyond the valley of all the economic and credit concerns to better times ahead," said Al Goldman, chief market strategist at Wachovia Securities in St. Louis. "People are a little less pessimistic."
Fannie Mae (FNM.N) and Freddie Mac (FRE.N) rallied for a third straight day as investors grew more confident that there will not be a government bailout that would wipe out their equity.
The Dow Jones industrial average .DJI was up 89.64 points, or 0.79 percent, at 11,502.51. The Standard & Poor's 500 Index .SPX was up 10.12 points, or 0.80 percent, at 1,281.63. The Nasdaq Composite Index .IXIC was up 20.49 points, or 0.87 percent, at 2,382.46.
Trading volume, which has been light for much of August, was especially thin ahead of the U.S. Labor Day holiday weekend. Thin trade can exaggerate price moves.
Fannie Mae, the biggest provider of U.S. home financing, rose 15.3 percent to $6.48, while shares of Freddie Mac gained 19.7 percent to $4.75.
Merrill Lynch & Co. in a Tuesday note became at least the third major Wall Street bank to cast doubt on speculation that the Treasury would add direct support to the companies, since both have adequate capital to offset losses for "several quarters."
That helped lift stocks of big U.S. banks and financial companies, many of which have significant underwriting business with the two government-sponsored mortgage finance firms.
Shares of Bank of America (BAC.N), the No. 2 U.S. bank, were among the top boosts for the S&P and Dow, rising 2.2 percent to $29.65. Lehman Brothers LEH.N rose 5.4 percent to $14.78.
News from the Commerce Department that July durable goods orders jumped by 1.3 percent, beating expectations, also drove up shares. Alcoa (AA.N), the world's biggest aluminum producer, added 1.5 percent to $32.08. Boeing rose 1.7 percent to $64.52.
The report followed a mixed bag of housing data on Tuesday that showed sales continued to fall in July though at a slower rate than in June.
"What we are looking for is to be able to say 'We've found a trough,'" said Linda Duessel, equity market strategist at Federated Investors in Pittsburgh. "But if that's so, we can still meander around for a while, so I wouldn't get too excited yet."
A resurgence in oil prices, which settled up 1.6 percent at $118.15 a barrel, boosted energy stocks. ConocoPhillips (COP.N) rose 1.3 percent at $83.47, while Chevron (CVX.N) added 1 percent to $86.62.
On Nasdaq, shares of Amylin Pharmaceuticals Inc (AMLN.O) fell almost 25 percent on news that its diabetes drug, Byetta, which it sells with Eli Lilly & Co. (LLY.N), was linked to four more deaths in pancreatitis patients, adding to two deaths announced by federal regulators last week. [ID:nN26362203]
Bristol-Myers Squibb Co. (BMY.N) and Pfizer Inc. (PFE.N) fell after they said late Tuesday their blood clot preventer apixaban failed its primary goal in a late-stage trial and they no longer plan to seek marketing approval for it next year. Bristol-Myers was off 2.1 percent at $21.52 and Pfizer fell 1 percent to $19.08. [ID:nN26375896]
Trading volume was light on the New York Stock Exchange, with about 819 million shares changing hands, well below last year's estimated daily average of roughly 1.90 billion, while on Nasdaq, about 1.55 billion shares traded, also below last year's daily average of 2.17 billion.
Advancing stocks outnumbered declining ones on the NYSE by about 3 to 1 while on the Nasdaq, advancers beat decliners by about 2 to 1. (Editing by Leslie Adler)
