WASHINGTON--Pending sales of previously owned U.S. homes rebounded unexpectedly in July and new claims for jobless benefits fell last week, helping quell fears the economy could face a double-dip recession.
The data released on Thursday, including sturdy sales from U.S. retailers last month, followed a report on Wednesday showing a surprising gain in manufacturing and suggested the economy retained some underlying strength.
"This is an economy that has hit a soft patch. It's not an economy that appears to be heading towards a double-dip recession," said Brian Levitt, an economist at OppenheimerFunds in New York.
Investors appeared to agree that fears of a double-dip recession might have been overdone as they sold U.S. government debt for a second straight day and bought stocks. The broad Standard & Poor's 500 Index ended up 0.91 percent.
The National Association of Realtors' Pending Home Sales Index, based on contracts signed, rose 5.2 percent in July from June. Analysts had expected the index, which leads actual sales by a month or two, to fall 1 percent.
Home sales have dropped sharply since a popular tax credit for home buyers ended in April and the surprise gain in pending sales raised hopes the sector could soon stabilize.
A separate report from the Labor Department showed initial claims for state unemployment benefits dropped for a second straight week last week, slipping 6,000 to 472,000.
Investor sentiment was also lifted by better-than-expected August data reported by retailers which showed sales getting a lift as consumers sought bargains during the key back-to-school selling season.
While new jobless claims declined last week, they are still high for this stage in the recovery. Two weeks ago they hit a nine-month high and they remain above where they stood at the beginning of the year.
"We're still uncomfortably high given where we are at this juncture of the recovery, but that we're moving towards 400,000 rather than 500,000 is indicative of at least some measure of job creation," said Mark Luschini, chief investment strategist at Janney Montgomery Scott in Philadelphia.
The government is expected to report on Friday that nonfarm payrolls dropped 100,000 in August, the third straight month of job declines, with private sector employment increasing only 41,000, according to a Reuters survey. The claims data offered few hints of whether those forecasts are on track, since it fell outside the survey period for the closely watched monthly jobs report.
The weak labor market threatens to derail the U.S. economy's recovery from the most painful recession since the Great Depression. Growth is losing steam as the boost from a $814 billion government stimulus package and the rebuilding of inventories by businesses fade.