Stocks Advance on Housing, Consumer News

Tuesday's gains were led by homebuilding, financial, and consumer service issues. Wednesday's watch list: July new home sales and durable goods orders

By Will Andrews

U.S. stocks closed higher Tuesday, led by gains in homebuilding, financial and consumer service issues. Lifting the market were better-than-expected reports on housing and consumer confidence.

News that President Barack Obama will nominate Ben Bernanke to a second term as Federal Reserve chairman ended uncertainty about who will lead the central bank as the economy rebounds.

On Tuesday, the 30-stock Dow Jones industrial average finished higher by 30.01 points, or 0.32%, at 9,539.29. The broad Standard & Poor's 500-stock index was up 2.43 points, or 0.24%, at 1,028.00. The tech-heavy Nasdaq composite index gained 6.25 points, or 0.31%, to 2,024.23.

Treasuries were higher after a successful $42 billion two-year note auction Tuesday. Gold futures were up as the dollar fell. Oil futures were lower.

The market awaited reports Wednesday on new home sales and durable goods orders for July.

In company news Tuesday, home improvement retailer Lowe's Companies (LOW) announced a joint venture with Woolworths of Australia.

Citigroup (C) reportedly accelerated its efforts to modify mortgages on its books.

Shares of Burger King (BKC) rose after the company reported a 16% gain in net profits.

Shares of automakers slipped as the "cash-for-clunkers" program came to an end.

The U.S. mid-session budget review released Tuesday showed the expected reduction in the fiscal 2009 budget deficit, but a steep increase in the cumulative deficit out ten years. The current red ink amount for the year is now estimated at $1.58 trillion, as was leaked last week. And also as indicated by press reports, the cumulative deficit is projected at $9.05 trillion through fiscal 2019. One significant revision to the economic assumptions is an increase in the unemployment rate to 10% by the end of the year, while averaging 9.3% for 2009. Previously the administration saw a peak at 9.4% later this year. GDP growth is predicted at 2.0% for 2010. The CPI is expected to contract 0.7% this year.

Meanwhile, the Congressional Budget Office projects a $1.6 trillion deficit this fiscal year, and a $1.4 trillion short fall in fiscal 2010. The cumulative 10 year budget deficit is estimated at $7.1 trillion . The economy is expected to grow at a 2.8% pace next year, and 3.8% in 2011. The unemployment rate is projected to average 10.2% next year.

Obama's decision to renominate Bernanke shows that the President has opted for continuity in U.S. economic policy despite criticism in Congress of the low-key central banker's frantic efforts to rescue the financial system, according to press reports. Bernanke is seen by supporters inside the administration and in markets as a creative and steady hand who helped to keep the financial chaos, which became especially dangerous in the past year, from becoming much worse.

Former Fed Chairman Paul Volcker said money-market mutual funds undermine the strength of the U.S. financial system and should be regulated more like banks, according to a Bloomberg News report. "Banks remain the functioning heart of the financial system, and they are protected and regulated," Volcker said. "To the extent they have competitors that have different ground rules, kind of free-riders in my view, weakens the financial system."

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