Stocks in the Green Again

The market rises modestly, but more bad news emerges from the U.S. housing sector.
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Updated from 4:16 p.m. EDT

Stocks in the U.S. closed slightly higher Thursday as the momentum from the previous session continued despite another round of poor housing data.

The

Dow Jones Industrial Average

gained 34.79 points, or 0.25%, to 13,912.94, putting the index a mere 91 points below its record close. The

S&P 500

was up 5.96 points, or 0.39%, at 1531.38. The

Nasdaq Composite

added 10.56 points, or 0.39%, to 2709.59.

"Technically, the market is extended and is pushing up under resistance," said Marc Pado, U.S. market strategist with Cantor Fitzgerald. "I don't foresee a pullback until next week, and then only for a week or two, as earnings become the main focus."

Breadth was positive, while volume was weaker than previous sessions this week. On the

New York Stock Exchange

, 2.81 billion shares changed hands, as advancers topped decliners by a 5-to-3 margin. Volume on the Nasdaq reached 1.72 billion shares, with winners outpacing losers nearly 8 to 7.

Last time, a late-session rally fueled by speculation over billionaire investor Warren Buffett potentially buying a stake in

Bear Stearns

(BSC)

led the major averages to strong finish.

Before the opening bell,

KB Home

(KBH) - Get Report

released its quarterly results. The homebuilder swung to a third-quarter loss due to "seriously challenging market conditions" and said it expects industry conditions to continue to worsen. Despite the loss, KB Home finished the session with a gain of 62 cents, or 2.6%, to $24.71.

Meanwhile, the Census Bureau said new-home sales data fell a disastrous 8.3% in August to 795,000 annualized units. Economists had anticipated a 5.2% decline.

Additionally, there was a net downward revision of 34,000 homes to the previous three months. Already this week, a report showed that existing-home sales fell 4.3% last month.

Ian Shepherdson, chief economist with High Frequency Economics, said that the housing slump is nowhere near a bottom, and that traders should still be concerned about its wider impact.

"The really bad news is that these data largely predate the market turmoil and subsequent tightening of lending standards, so sales have further to fall," he said. "People don't like borrowing to buy depreciating assets, and lenders don't like to lend on them either."

Pado added that the fact that new home sales fell below the 800,000 level should "worry sectors other than those that are directly housing-related."

Despite the loss at KB Home and the weak housing data, the Philadelphia Housing Sector Index rose 1.6% for the day.

Traders also had to digest several other economic reports. The Commerce Department said second-quarter gross domestic product was revised to a weaker-than-expected final read of 3.8%. It was expected that GDP rose 3.9% last quarter, compared with a 4.0% preliminary figure.

Additionally, the Labor Department said initial jobless claims dropped by 15,000 to 298,000 claims last week. Economists had expected claims to rise to 320,000.

On the equity side, traders focused on

SLM

(SLM) - Get Report

, commonly known as Sallie Mae, who said late Wednesday that a buyout group led by J.C. Flowers,

Bank of America

(BAC) - Get Report

and

JPMorgan Chase

(JPM) - Get Report

won't complete the acquisition of the student lender under the existing terms of their agreement.

Sallie Mae said it would "pursue all remedies available to it to the fullest extent permitted by law." After falling nearly 3% during the previous session, shares of SLM jumped $4.11, or 9.1%, to $49.12 on hopes the deal would be reworked and go through after all.

Microsoft

(MSFT) - Get Report

eased slightly despite news it sold $170 million worth of the Xbox 360 video game

Halo 3

in the first 24 hours after its launch Tuesday. Shares dipped 3 cents to $29.49.

Starbucks

(SBUX) - Get Report

was one of the session's notable losers, dropping 2.6% to $26.97, after Bank of America came out with pessimistic comments and put a sell rating on the coffee purveyor.

Elsewhere,

AMR

(AMR)

was told by Icelandic investor FL Group to spin off its frequent-flier program, saying the move would support its share price. The stock added 25 cents, or 1.2%, to $22.02.

Altria

(MO) - Get Report

submitted a preliminary registration statement to spin off its Phillip Morris International arm in order to separate its businesses. Altria rose 88 cents, or 1.3%, to $69.48.

Commodities were stronger. The front-month November crude contract surged $2.58 to close at $82.88 a barrel. Gold and silver futures also advanced.

U.S. Treasury securities rallied on the long end. The 10-year note was up 13/32 in price to yield 4.57%. The 30-year bond added 28/32, cutting the yield to 4.84%. The dollar touched a new low against the euro before rebounding after the day's economic releases.

Overseas markets jumped, following gains in U.S. equities during the previous session. Japan's Nikkei 225 and Hong Kong's Hang Seng both soared 2.4% overnight. In Europe, London's FTSE 100 was up nearly 1%, and Germany's Xetra Dax gained 0.8%.