Stocks Gain; Fannie Mae, Freddie Mac Rise

American stocks rose for a second day after orders for durable goods unexpectedly advanced in July and analysts said new investments by Fannie Mae and Freddie Mac will boost their earnings.

Bank of America Corp. and American Express Co. each climbed more than 2% after the Commerce Department report bolstered expectations that the economy is recovering. Fannie Mae and Freddie Mac rallied more than 15% each after the largest American mortgage finance companies also sold $3 billion in debt at yields which suggest they won't need a government bailout. Oil's advance of more than $2 a barrel pushed up 38 of 39 energy producers in the Standard & Poor's 500 Index.

The S&P 500 added 10.15 points, or 0.8%, to 1,281.66, with 9 of its 10 main industry groups gaining. The Dow Jones Industrial Average climbed 89.64, or 0.8%, to 11,502.51. The Nasdaq Composite Index increased 20.49 to 2,382.46. Four stocks advanced for each that fell on the New York Stock Exchange.

"As long as businesses are optimistic, we have a good chance of pulling out of this weak period in the economy in fairly short order," a manager of $1.5 billion at OakBrook Investments in Lisle, Ill., Peter Jankovskis, said. The durable goods data "was a very strong report, and the market has acted appropriately."

The 1.3% gain in durable goods orders defied economist forecasts for an unchanged reading in July. Stock futures fell before the Commerce Department report as a third day of gains in oil spurred concern that crude's rebound from a more than 20% tumble since July will threaten profits at consumer, transportation, and technology companies.

Trading on the NYSE was the slowest for a full session since December 2006, with about 820 million shares changing hands. Volume since the start of last week has been more than one-third lower than the year-to-date average.

Fannie Mae added 86 cents to $6.48, while Freddie Mac gained 78 cents, or 20%, to $4.75. The mortgage-finance companies may get the biggest profits on new investments since at least 1998. The current-coupon mortgage bonds Fannie and Freddie buy yield about 40 basis points, or 0.40 percentage point, more than what they pay to borrow by selling benchmark bonds, Citigroup Inc. said in a report. The difference exceeded 20 basis points only twice in the 10 years through 2007 — in 1998 and 2003.

The two companies yesterday sold short-term debt at yields relative to benchmark rates that were higher than in sales earlier this month, yet below levels seen a year ago, data compiled by Bloomberg show. Investors have been watching the debt sales for any "tell-tale" signs that the companies can't fund themselves, UBS AG analysts in New York wrote in a report.

Fannie, which tumbled 37% last week on concern a government bailout will wipe out shareholders, has risen for five straight days for its longest streak of gains in a year.

Merrill Lynch & Co. gained $1.17, or 4.9%, to $25.27. Temasek Holdings Pte, Singapore's $130 billion sovereign wealth fund, said it has "great confidence" in the chief executive officer of Merrill, John Thain, and plans to raise its stake.