Stocks higher even as economy lags

NEW YORK (CNNMoney.com) -- Stocks turned higher Thursday after a string of weak economic numbers and lackluster corporate earnings may be raising hopes the Federal Reserve will cut interest rates.

The 30-share Dow Jones Industrial Average, the broader S&P 500 and the tech-heavy Nasdaq all rose about 0.4 percent.

The weak economic numbers started early on Thursday and continued through mid-morning.

Before the bell, the government said orders for durable goods fell unexpectedly by 1.7 percent in September. Analysts were looking for a gain of 1.5 percent, according to economists surveyed by Briefing.com. August orders were also revised lower.

In a seperate report, the government said the number of jobless claims last week fell by 8,000 to 331,000, which was a smaller drop than expected.

Then at 10 am new home sales came in weaker than expected, although they showed a slight uptick from an August reading that was revised sharply lower to an 11-year low.

On Wednesday, the National Association of Realtors reported that existing home sales posted its worst drop since the trade group started tracking that key measure in 1999.

News on the corporate front wasn't much better.

No. 1 cable operator Comcast (Charts) reported earnings that met forecasts, cell phone maker Motorola (Charts, Fortune 500) reported a plunge in earnings that was a penny a share worse than forecast and Dow Chemical (Charts, Fortune 500), the nation's No. 1 chemical company, saw a bigger than forecast drop in earnings excluding special items.

One bit of positive news came from Microsoft.

On Wednesday, the software maker said it was making a $240 million investment in social networking site Facebook, beating out rivals Google and Yahoo. Microsoft also said it was expanding its advertising deal with the site.

Microsoft (Charts, Fortune 500), a Dow component, is also due to report results after the close Thursday, with analysts looking for an 11 percent gain in earnings.

Oil prices, already near record highs, rose $1.51 to $88.61 a barrel on the new York Mercantile Exchange.

In Asia, Hong Kong stocks finished the session higher, but China's benchmark index sank nearly 5 percent on worries that economic growth in China had peaked. Shares on Japan's Nikkei slipped 0.5 percent. After the close of trading there, Honda reported profit jumped 63 percent in the most recent quarter.

Stocks were generally higher in Europe in early trading as the rising hopes of a Federal Reserve rate cut that lifted U.S. stocks in late trading Wednesday were also cheering European investors.

Market breadth was negative. Losers edged out winners by a slight margin on the New York Stock Exchange, while decliners topped advancers by 3 to 2 on the Nasdaq.

Comex gold rose $7.30 to 772.90 an ounce.